MANOJ SHANTILAL METHA,MUMBAI vs. INCOME TAX OFFICER-WARD 27(2)(2), MUMBAI

The assessee has filed this appeal challenging the order dated 29-02- 2024 passed by Ld CIT(A), NFAC, Delhi and it relates to the assessment year 2008-09. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the penalty of Rs.15,95,946/- levied by the AO u/s 271(1)(c) of the Act.

The AO received information that the assessee has availed accommodation entries in the form of purchases to the tune of Rs.3,65,66,625/- from certain traders, who have been identified as accommodation entry providers by Maharashtra Sales Tax department. Accordingly, he reopened the assessment u/s 147 of the Act and added a sum of Rs.45,70,828/-, being 12.50% of the above said purchases as possible profits from the bogus purchases. The Ld CIT(A), however, reduced the addition to 2.50% of the value of purchases. The revenue challenged the Manoj Shantilal Mehta decision of Ld. CIT(A) by filing appeal before the ITAT, which set aside the order passed by Ld CIT(A) and restored the addition made by the AO. The Ld A.R submitted that the assessee has filed appeal before Hon’ble High Court of Bombay assailing the decision of the ITAT.

The AO initiated penalty proceedings u/s 271(1)(c) of the Act in respect of above said addition and levied a penalty of Rs.15,95,946/-, being the minimum amount of penalty that could be levied u/s 271(1)(c) of the Act. The Ld CIT(A) also confirmed the same and hence the assessee has filed this appeal.

The contention of the assessee is that the AO has made the addition on estimated basis and hence the said addition could not be considered either as concealment of particulars of income or furnishing of inaccurate particulars of income. Accordingly, the Ld A.R submitted that the AO should not have levied penalty u/s 271(1)(c) of the Act on the estimated addition. In support of this proposition, he placed reliance on the following decisions:-

We heard the parties and perused the record. In the case of Shri Jignesh Amrutlal Shah (supra), the co-ordinate bench has deleted the penalty levied on the estimated addition. In the above said case, the Co- ordinate Bench of the Tribunal has taken support of the decision rendered by the Hon‟ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT [258 ITR 85] and also the decision rendered by the Hon‟ble Delhi High Court in the case of CIT vs. Aero Traders Pvt. Ltd., [322 ITR 316], wherein the Hon‟ble High Courts have held that the estimate of profit on the

In the instant case, the addition has been made on estimated basis. Accordingly, following the above said decisions, we hold that penalty u/s 271(1)(c) of the Act could not be levied on the estimated addition. Accordingly, following the above said decisions, we set aside the order passed by the Ld.CIT(A) and direct the AO to delete the impugned penalty levied u/s.271(1)(c) of the Act for the year under consideration.

In the result, the appeal of the assessee is allowed.