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Income Tax Appellate Tribunal, VIRTUAL COURT
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI RAVISH SOOD, HONBLE
O R D E R PER S. RIFAUR RAHMAN, AM
This appeal is filed by the revenue against order of the Learned Commissioner of Income Tax (Appeals)–50, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 19.02.2020 for the A.Y. 2011-12.
Brief facts of the case are that, assessee company is engaged in the business of fabrication and galvanizing, manufacturing, erection and (A.Y: 2011-12) M/s. Karamtara Engineering Pvt. Ltd., commissioning of telecom and transmission towers. Assessee filed return of income on 29.09.2011 declaring total income at ₹.9,74,72,546/-. The case was selected for scrutiny and assessment was completed u/s. 143(3) of the Income-tax Act, 1961 (in short “Act”) vide order dated 24.03.2014 assessing the total income at ₹.10,18,25,896/-. The assessment was completed with a disallowance of ₹.31,82,357/- on account of unexplained expenditure which relates to alleged bogus purchases. The Assessing Officer received information form Sales Tax Department, Government of Maharashtra that assessee has made purchases from three parties who are involved in providing accommodation entries. Based on the information assessee was asked to substantiate the purchases. The information submitted by the assessee was rejected by the Assessing Officer and proceeded to make the addition in respect of transactions with the hawala dealers as unexplained purchases. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and after considering the submissions of the assessee Ld.CIT(A) reduced the disallowance to the extent of 14.81% and 1% as commission on alleged bogus purchases. Aggrieved assessee preferred an appeal before the ITAT and Coordinate Bench after considering the detailed submissions remitted the issue back
(A.Y: 2011-12) M/s. Karamtara Engineering Pvt. Ltd., to the file of the Assessing Officer to redo the assessment after providing adequate opportunity of being heard to the assessee.
The Assessing Officer initiated the penalty proceedings based on the order passed by the Ld.CIT(A) treating the transaction as bogus and levied the minimum penalty leviable at ₹.3,12,086/- u/s. 271(1)(c) of the Act. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) deleted the penalty based on the facts on record that Coordinate Bench of the Tribunal has remitted the issue of alleged bogus purchases to the file of the Assessing Officer to redo the assessment, as such there is no addition exist as of now and further he gave a direction that in case the appeal of the assessee is reconsidered by higher appellate authorities the penalty may be reinstated. Aggrieved revenue is in appeal before us raising the following grounds of appeal: - “Whether on facts and circumstances and in law, the Ld CIT(A) has erred in deleting the penalty without appreciating the fact that the parties from whom the assessee had made these alleged bogus purchases of Rs.31,82,357/during the course of search and seizure proceedings u/s.64 of the Sales Tax Department, Mumbai had accepted vide statement recorded u/s.14 of Maharashtra Value Added Tax Act, 2002 that they have not done any genuine business and issued sales bill only.”
4. Considered the rival submissions and material placed on record, we noticed that the quantum appeal filed by the assessee is remitted back to the file of the Assessing Officer to redo the assessment denovo and (A.Y: 2011-12) M/s. Karamtara Engineering Pvt. Ltd., moreover Ld.CIT(A) sustained the addition based on the estimation of income to the extent of 14.81% and 1% additional commission. It clearly shows that in quantum appeal the maximum liability on the assessee is limited to the extent of income which is estimated based on the Gross Profit declared by the assessee and the sales tax which should have been avoided by the assessee. In our considered view the penalty cannot be levied on the income which itself is based on estimation, the courts have held that the penalty cannot be levied on the income which is determined on the basis of estimation. Therefore, the penalty levied by the Assessing Officer is accordingly directed to be deleted. We do not see any reason to interfere with the findings of the Ld.CIT(A) accordingly ground raised by the revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced on 30.11.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.