M/S. SPONTTENEOUS CHEM PVT. LTD.,MUMBAI-400003 vs. INCOME TAX OFFICER-8(2)(3), MUMBAI

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ITA 1249/MUM/2022Status: DisposedITAT Mumbai04 August 2022AY 2009-103 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty under Section 271(1)(c) cannot be levied on an addition made on an estimated basis. Therefore, the levy of penalty was directed to be deleted.

What were the facts?

The assessee made purchases from parties identified as 'tainted dealers' by the Sales Tax department. The AO estimated the profit on these purchases at 12.5% and made an addition. The CIT(A) upheld this addition and subsequently confirmed the penalty levied under Section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) can be imposed on an addition made on an estimated basis. Whether the CIT(A) was justified in confirming the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘H‘ BENCH

Before: SHRI M.BALAGANESH & SHRI ANIKESH BANERJEE

For Respondent: Shri Tejinder Pal Singh
Hearing: 03/08/2022Pronounced: 04/08/2022

आदेश / O R D E R PER M. BALAGANESH (A.M):

1.

This appeal in A.Y.2009-10 arises out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal No.CIT(A), Mumbai – 14/10029/2019-20 dated 25/03/2022 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as Act).

M/s. Spontaneous Chem Pvt. Ltd.,

2.

The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the levy of penalty u/s.271(1)(c) of the Act in respect of addition made on account of bogus purchases on an estimated basis.

3.

None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. It is not in dispute that assessee had made certain purchases from six parties totalling to Rs.1,51,26,291/- whose names have been treated as tainted dealers by the Sales Tax department of Government of Maharashtra. The assessee is engaged in the business of trading in chemicals. The ld. AO during the course of quantum assessment proceedings had observed that assessee had submitted the details of entire purchases and had duly entered in the stock register and also furnished the details of further corresponding sales thereof. Since assessee could not prove the veracity of the purchases beyond reasonable doubt, the ld. AO proceeded to bring to tax only the profit element embedded in the value of such disputed purchases. This profit element was estimated by the ld. AO at 12.5% and addition was made in the assessment. This action of the ld. AO was upheld by the ld. CIT(A). Subsequently, penalty u/s.271(1)(c) of the Act was levied by the ld. AO on the addition sustained by the ld. CIT(A). This levy of penalty also was upheld by the ld. CIT(A).

3.1. From the above narration of facts, it could be seen that ultimately penalty has been levied u/s.271(1)(c) of the Act for an addition made on an estimated basis. It is trite law that no concealment penalty u/s.271(1)(c) of the Act could be made on an estimated addition. Hence, we have no hesitation in directing the ld. AO to delete the levy of penalty

M/s. Spontaneous Chem Pvt. Ltd., u/s.271(1)(c) of the Act in the instant case. Accordingly, the grounds raised by the assessee are allowed.

4.

In the result, appeal of the assessee is allowed.

Order pronounced on 04/08/2022 by way of proper mentioning in the notice board.

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