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Facts
The assessee's appeal was against an order of the NFAC concerning AY 2009-10, stemming from an AO's order imposing penalty under Section 271(1)(c) of the Income-tax Act. The appeal was filed with a significant delay, which was condoned by the Tribunal. The penalty was imposed on additions related to bogus purchases, confirmed by the CIT(A).
Held
The Tribunal held that a penalty cannot be imposed when the addition is made on the basis of an estimate of gross profit, especially when it was restricted to 12.5% by a co-ordinate bench. The CIT(A) failed to consider this aspect. Consequently, the penalty was quashed.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when additions are based on an estimated gross profit, and if the CIT(A) failed to consider this aspect.
Sections Cited
271(1)(c), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Before: SHRI ANIKESH BANERJEE & SHRI PRABHASH SHANKARShri Kamal H Shah vs
Instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi *for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’), date of order 25/05/2023 for A.Y. 2009-10. The impugned order was emanated from the order Kamal H Shah of the Learned Income-tax Officer, Ward 18(2)(1), Mumbai (in brevity, ‘the AO’), passed under section 271(1)(c) of the Act, date of order 27/03/2018.
The appeal of the assessee was filed with a delay of 481 days. The assessee filed an affidavit executed on 24/09/2024 and the delay was duly explained. The Ld.DR has not made any objection against the assessee’s submission for condoning the delay of 481 days. The reasons for the delay is well explained. Accordingly, we condoned the delay fo 481 days and the appeal is admitted for adjudication.
The appeal of the assessee was filed against the order under section 271(1)(c) of the Act and penalty imposed amount to Rs.3,98,700/-. The assessment was completed and addition was made related to the bogus purchases @12.5% of the gross profit. The order was assailed before the Ld.CIT(A) as also before the ITAT, but the assessee has failed. Then the penalty proceedings were initiated under section 271(1)(c) and penalty was imposed in respect of income amount to Rs.11,76,195/- and penalty levied at Rs.3,98,700/- being 100% of the tax sought to be evaded. The penalty order was assailed before the Ld.CIT(A), but the Ld.CIT(A) rejected the appeal of the assessee. Finally the appeal was filed by challenging the order of the Ld. CIT(A) before the ITAT.
The Ld.AR placed that the addition was made on the basis of the gross profit @12.5% on the bogus purchase and assessee has admitted the addition before the Ld.AO. But the penalty on the addition of GP on bogus purchase is duly unjustified and which is covered by the order of the co-ordinate bench of ITAT, Mumbai Bench “D” in the case of Dombivali Paper Mfg Co. Pvt Ltd vs ACIT, Circle-1, Kalyan in date of pronouncement 16/12/2023. The relevant paragraphs No.9 & 10 are reproduced herebelow:-