ITO WARD 1(2), THANE vs. SHRI. MOHAMMED SAJID HAROON SHAIKH, THANE

Per Kuldip Singh, Judicial Member:

“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied u/s 271(1)(c) without properly appreciating the decisions of the Hon’ble Apex Court in the case of Mak Data Pvt. Ltd. Vs CIT ( Civil Appeal No. 9772 of 2013)”, the Hon’ble Gujarat High Court’s decision ; in the case of N. K. Proteins Ltd, Tax Appeal No. 242 of 2003 dated 2 Shri Mohammed Sajid Haroon Shaikh 20/06/2016 against which the SLP was dismissed by the Hon’ble Supreme Court and also ignoring the fact that Department received specific credible ‘information in this case from the Sales Tax Department of the State Government of Maharashtra” in respect of non-genuine purchases.

2. Briefly stated facts necessary for adjudication of the controversy at hand are : on the basis of assessment framed under section 143(3) of the Act at the total income of Rs.8,06,166/- by way of making addition by estimating the gross profit of the assessee for the year under assessment @ 20.08% for alleged bogus purchases made by the assessee, the penalty proceedings have been initiated under section 271(1)(c) of the Act. Declining the contentions raised by the assessee the Assessing Officer (for short the AO) proceeded to levy the penalty to the tune of Rs.67,000/- @ 100% of the tax sought to be evaded.

3. The assessee carried the matter before the Ld. CIT(A) by way of filing the appeal who has deleted the penalty by allowing the appeal.

Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and case law relied upon.

On the other hand, the Ld. D.R. for the Revenue challenging the impugned order passed by the Ld. CIT(A) relied upon the penalty order passed by the AO and contended that when bogus purchase bills have been relied upon by the assessee he has furnished the inaccurate particulars.

4 Shri Mohammed Sajid Haroon Shaikh “Having heard both sides, we find merit in the arguments of the assessee for the reason that although the AO has estimated 25% gross profit on alleged bogus purchases, never made any observations with regard to the incorrectness in details filed by the assessee to prove such purchases. The AO never disbelieved information filed by the assessee, but the proceeded on the basis of information received from sales-tax department to make additions. The AO has made such addition on ad hoc basis by estimating gross profit on alleged bogus purchases. From these facts, it is very clear that the AO failed to make a case of deliberate attempt by the assessee to furnish inaccurate particulars of income. Therefore, we are of the considered view that mere ITA 2998/Mum/2017 disallowance of purchases on ad hoc basis does not tantamount to wilful furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax Act, 1961. Hence, we are of the considered view that the AO was erred in levying penalty u/s. 271(1)(c) of the Act. Accordingly we direct the AO to delete penalty levied u/s. 271(1)(c) of the Act.”

Order pronounced in the open court on 05.01.2022.