PRITESH JITENDRA MEHTA,MUMBAI vs. INCOME TAX OFFICER WD, 27(2) (5), NAVI MUMBAI

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) (NFAC), Delhi dated 23.09.2021 for the assessment year 2009-10 against the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”).

The grievance raised by the assessee is against the action of the Ld. CIT(A) is confirming the penalty of Rs.73,792/- levied u/s 271(1) (c) of the Act. 3. Brief facts is that the assessee is a proprietor of M/s. M.P. Traders engaged in the business of trading in various kinds of Iron and Steel products, Ball bearing and General Goods. The assessee filed his return of income declaring total income of Rs.3,83,330/-. Subsequently, based on information received from the investigation wing that the assessee had made purchases to the extent of 2 A.Y. 2009-10 Pritesh Jitendra Mehta Rs.17,93,277/- from nineteen (19) hawala parties (bogus), the case was reopened and after the re-assessment, AO treated the transaction with them as non-genuine and added Rs.5,82,397/- [which was the peak amount/value of purchases made from these hawala parties]. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to restrict the addition to Rs.2,24,160/- being 12.5% of the purchases of Rs.17,93,277/-. Thereafter, the AO had levied penalty u/s 271(1)(c) of the Act by order dated 25.03.2019 and made an addition of Rs.73,972/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved by the impugned order of the Ld. CIT(A) confirming the penalty, the assessee is before us. 4. We have heard the rival contention, perused the material on record and note that an addition made by AO in respect of the bogus purchases was to the tune of Rs. 5,82,397/- which has been restricted to Rs. 2,24,160/- (being 12.5% of Rs. 17,93,277/-) and thereby has granted relief to the assessee to the extent of Rs.3,58,237/-. It is noted that the Ld. CIT(A) has resorted to estimating the income i.e. 12.5% being profit embedded from the bogus purchases of Rs.17,93,277/-. So the Ld. CIT(A) has partially sustained the addition made by AO on the basis of estimation of income. We note that this Tribunal in such cases (wherein additions have been made on estimation basis) has held that the penalty u/s 271(1)(c) of the Act may not be imposed [(refer Chempure Vs. ITO (2010) 40 SOT 164) (Mum)], wherein a co-ordinate bench of this Tribunal dealing with a materially identical addition [in 3 A.Y. 2009-10 Pritesh Jitendra Mehta respect of bogus purchases wherein profit embedded therein was computed @25%], had come to the conclusion that no penalty under section 271(1)(c) be imposed and the view so taken by the coordinate bench has been consistently followed in a large number of cases (refer ITO Vs. Filtertechnics Pvt. Ltd. dated 25.01.2021). Even otherwise, when the assessee had produced all relevant documentary evidences like purchase invoices, details of banking transactions, etc, and if adverse view is taken in quantum assessment for want of confirmation from the parties/suppliers, then in such an event also this Tribunal has held that penalty u/s 271(1)(c) of the Act was not warranted. [refer the case of Earthmoving Equipment Service Corporation Vs DCIT [(2017) 84 taxmann.com 51 (Mum)], wherein it was concluded as follows: 7. On merits, Ld. AR has assailed imposition of penalty on various grounds and placed reliance on various judicial pronouncements which we have duly considered. We find that first of all Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. Merely because the suppliers could not be traced at 4 A.Y. 2009-10 Pritesh Jitendra Mehta the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. All the cited case laws support the view taken by us in the matter. Therefore, by deleting the impugned penalties, we allow assessee's appeal.” 5. From the aforesaid discussion, we see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the consistent view of the coordinate benches, and bearing in mind the fact that the related quantum addition was purely on estimated basis with inherent subjectivity involved, we are of the opinion in the overall facts of the case, that the penalty u/s 271(1)(c) of the Act was not justified. Therefore, we direct deletion of the penalty.