ITO-25(3)(4), MUMBAI vs. SUNIL BABULAL DOSHI, MUMBAI

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ITA 5629/MUM/2019Status: DisposedITAT Mumbai31 August 2021AY 2009-108 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the penalties. It found no evidence of concealment of income or furnishing of inaccurate particulars by the assessee, which are prerequisites for levying penalty under Section 271(1)(c).

What were the facts?

The Assessing Officer made additions for bogus purchases and levied penalties. The CIT(A) deleted the penalties, holding that mere disallowance on estimation of profit for bogus purchases does not automatically attract penalty under Section 271(1)(c). The Revenue appealed this deletion.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied solely on the basis of additions made for estimated profit on bogus purchases without establishing conscious concealment or furnishing of inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

For Appellant: Shri T.S. Khalsa, DR
Hearing: 14.06.2021Pronounced: 31.08.2021

Heard together (3 matters)

ITA No. 5629/Mum/2019
ITA No. 5630/Mum/2019
ITA No. 5631/Mum/2019

Read from the judgment's own cause title. This page is filed under one of them.

आदेश / O R D E R भहावीय ससिंह, उऩाध्मऺ के द्वाया / PER MAHAVIR SINGH, VP: These appeals of Revenue are arising out of the common order of the Commissioner of Income Tax (Appeals)]-37, Mumbai, [in short CIT(A)], in appeal No. CIT(A)-37/IT-27/ITO-25(3)(4)/2018-09, CIT(A)-

1.

2. The only common issue in these three appeals of Revenue is against the order of CIT(A) deleting the levy of penalty on estimated income in regard to estimation of profit on bogus purchases. For this, Revenue has raised the identically worded grounds in all the three years and the quantum involved in of ₹5,16,675/- and in ITA No. 5631/Mum/2019 of ₹2,40,607/-.

3.

The facts and circumstances are also identical in all these three years. Hence, we will take up the facts from AY 2009-10 and decide the issue. The relevant ground raised in Assessment Year 2009-10 reads as under:-

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the I.T. Act, 1961 to the tune of ₹72,606/- relevant to quantum addition made by the Assessing Officer and Ld. CIT(A) failed to appreciate the fact that the quantum addition made by the Assessing Officer is squarely covered under the exception mentioned in para 10 of CBDT circular

2.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to consider the fact that the quantum addition for the year under consideration was based on the information received from DGIT (Inv.), Mumbai that the Hawala Dealers had confirmed on oath before the Sales Tax Department that purchases made by the assessee were without supplying the goods, hence the penalty levied on the quantum addition for the year under consideration stands justified.”

4.

The Brief facts are that the assessee has field the return of income for the Assessment Years 2009-10, 2010-11 & 2011-12 declaring total income of ₹ 2,39,620, ₹5,81,540/- and ₹7,88,842/- which were assessed at ₹53,35,660/- ₹ 2,93,11,510 and ₹3,97,22170/- respectively. The Assessing Officer made total disallowance for bogus purchases at the rate of 100% of the bogus purchases. Aggrieved preferred the appeal before CIT(A), who partly confirmed the appeal by reducing the disallowance at the rate of 12.5% of the bogus purchases by observing as under:-

“I have perused the available material on the issue and also gone through the various cases cited by the counsel of the assessee and the ratios of which further substantiate the settled legal position pertaining to levy of penalty is outlined below: (a) The penalty

5.

However, the Hon’ble ITAT, Mumbai reduced the addition to the extent of 4.61%, 5.82% and 2% for the Assessment Year 2009-10, 2010-11 and 2011-12 respectively. Further, the Assessing Officer levied the penalty u/2 271(1)(c) on 23.03.2018, for which the assessee is in appeal before us.

6.

After hearing both the sides, we noted that the CIT(A) has deleted the penalty for all the Assessment Years by observing as under:-

“I have the available material on the issue and also gone through the various cases cited by the counsel of the assessee and the ratios of which further substantiate the settled legal position pertaining to levy of penalty is outlined below:

(a) The penalty proceedings are independent of assessment proceedings. Before levy of penalty order under Section 271(1)(c), the Assessing Officer has to establish that there was concealment or furnishing of inaccurate particulars of income on the part of the assessee.

(C) Penalty cannot be levied simply because addition is sustained in quantum proceedings. It would be perfectly legitimate give rise to the inference that the disputed amount represents income of the assessee.

(d) Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and the assessee and has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars; (e) If the books of account of the assessee are rejected and trading addition is sustained by estimating net profit, it cannot be presumed that the assessee has concealed income so as to attract the provisions of Section 271(1)(c).

It is observed that the impugned addition was made by the Assessing Officer only because of lack of evidence to establish the purchase. The addition has been made in this case merely on account of the assessee’s failure to establish the identity of the supplier. As such considering all the facts and circumstances of the case, in entirety, and the well-

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