ASSTT. CIT - 32, MUMBAI vs. SHRI DHARMESH P. BHATT, MUMBAI

O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the revenue against different orders of the Learned Commissioner of Income Tax (Appeals)–44, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 17.02.2020 for the A.Ys., 2010-11 and 2011-12.

2 & 1650/MUM/2020 (A.Ys. 2011-12 & 2010-11) Shri Dharmesh P. Bhatt 2. Briefly stated the facts are that, assessee an individual and trader in Iron and steel, filed return of income declaring income of ₹.57,59,090/- and ₹.61,46,530/- for the A.Y.2010-11 & 2011-12 respectively. The returns were processed u/s.143(1) of the Act. Subsequently, assessments were reopened u/s. 147 of the Act and completed the re-assessment on 26.02.2013 & 22.02.2016 u/s. 143(3) r.w.s 147 of the Act determining the income at ₹.92,34,110/- & ₹.94,46,530/- for the A.Y.2010-11 & 2011-12 respectively. While completing the reassessment the Assessing Officer treated purchases of ₹.34,75,014/- & 32,99,995/- being 12.5% of the impugned purchases, as non-genuine on the basis of the information received from DGIT (Investigation), Mumbai that assessee has received accommodation entries from various dealers without making any purchases but made purchases only in gray market. The Assessing Officer treated such purchases as non-genuine as assessee could not produce any delivery challans to prove that goods have been actually received by the assessee from the alleged suppliers. On appeal, Ld.CIT(A) sustained the addition made by the Assessing Officer at 12.5% of the non-genuine purchases. Subsequently, Assessing Officer initiated penalty proceedings and levied penalty of ₹.10,73,781/- & ₹.10,19,700/- u/s. 271(1)(c) of the Act for A.Y. 2010-11 and 2011-12 respectively, stating that the assessee

3 & 1650/MUM/2020 (A.Ys. 2011-12 & 2010-11) Shri Dharmesh P. Bhatt has furnished inaccurate particulars of its income and concealed its income within the meaning of section 271(1)(c) r.w. Explanation 1 of the Act. On appeal the Ld.CIT(A) deleted the penalty made by the Assessing Officer. Against these orders of the Ld.CIT(A), revenue is in appeal before us.

4 & 1650/MUM/2020 (A.Ys. 2011-12 & 2010-11) Shri Dharmesh P. Bhatt “6. We have heard the rival submissions, perused the orders of the authorities below. In so far as the penalty levied on estimation of profit element on purchases is concerned, we are of the view that Assessing Officer had made only adhoc estimation of profit on certain purchases treated as unexplained expenditure. Assessing Officer did not doubt the sales made by the assessee from out of such purchases. Assessing Officer based on the decision of the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] estimated the profit element in such purchases at 12.5% and by reducing the Gross Profit already declared by the assessee. In the circumstances, we hold that there is no concealment of income or furnishing of inaccurate particulars as the profit element was determined by way of adhoc estimation. Coming to the interest, the assessee furnished complete details in the return of income and made a claim and simply because the claim is denied and cannot lead to furnishing of inaccurate particulars or concealment of income. No allegation by Assessing Officer that the assessee failed to disclose the particulars relating to its claim in the return of income. Thus we hold that there is no concealment of income or furnishing of inaccurate particulars of income. Thus we direct the Assessing Officer to delete the penalty levied u/s. 271(1)(c) of the Act.”

Order pronounced on 16.12.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.