ITO 12(1)(2), MUMBAI vs. ANMOL TOYS PVT. LTD., MUMBAI

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ITA 6236/MUM/2019Status: DisposedITAT Mumbai31 August 2021AY 2009-104 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 held that penalty cannot be levied on income based on estimation. Therefore, agreeing with the CIT(A), the penalty was deleted.

What were the facts?

The Assessing Officer disallowed 100% of purchases treating them as bogus. The CIT(A) restricted the addition to 6% of the alleged purchases. Subsequently, a penalty was levied under Section 271(1)(c) based on this restricted addition.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on an estimated addition sustained by the CIT(A)?

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI

Before: SHRI C.N. PRASAD & SHRI S. RIFAUR RAHMAN

For Respondent: Mr. Brajendra Kumar, DR
Hearing: 17/06/2021Pronounced: 31/08/2021

ORDER PER S. RIFAUR RAHMAN, A.M. The captioned appeals filed by the Revenue are directed against the respective orders passed by the CIT(A)-20, Mumbai dated 17.06.2019 for AYs 2009-10 & 2010-11. As the issue involved in the captioned appeals are inextricably interlinked or in fact interwoven and having common issue, the same are therefore being taken up and disposed off by way of a consolidated order. Facts being identical we begin with the AY 2009-10.

M/s Anmol Toys Pvt. Ltd. 2 & 6235/M/2019

2.

At the outset, it is noticed that none appeared on behalf of assessee in spite of calls and even no application for adjournment was moved. On the other hand, Ld. DR is present in the court and is ready with arguments. Therefore, we have decided to proceed with the hearing of the case ex-parte with the assistance of the Ld. DR and the material placed on record.

3.

Brief facts of the case are the assessee filed its return of income on 28.09.2009 declaring total income at Rs.9,95,837/-. The assessment was completed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short ‘the Act’) on 19.03.2015 determining total income of Rs.20,14,980/-. During the course of assessment proceedings on verification of the purchases made by the assessee, the Assessing Officer noticed that three parties from whom the assessee has purchased to the extent of Rs.10,19,135/- as bogus, based on the information received from DGIT (Inv.) and further investigation made by him. Accordingly, he made a disallowance of 100% of the purchases and proceeded with the penalty proceedings u/ 271(1)(c). Subsequently, the assessee preferred an appeal before Ld. CIT(A) against the assessment order and Ld. CIT(A) restricted the addition to the extent of 6% of the alleged purchases. Considering the above, the Assessing Officer also levied the penalty based on the findings of Ld. CIT(A) and accordingly levied the penalty of Rs.18,895/- u/s 271(1)(c) of the Act.

M/s Anmol Toys Pvt. Ltd. 3 & 6235/M/2019

4.

Aggrieved with the above order, the assessee preferred an appeal before Ld. CIT(A) and after considering the submissions of the assessee, the Ld. CIT(A) deleted the penalty.

5.

Aggrieved with the above order, the Revenue raised following grounds of appeal before us:

1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961, of Rs.18,895/- without appreciating the facts that the assessee claimed bogus purchases in its Return of income and thus furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax Act, 1961.

2. On the facts and in the circumstances of the case, the Hon’ble ITAT is requested to entertain this appeal though the tax effect is below the monetary limit prescribed in the CBDT’s Circular No. 17/2019 dated 08.08.2019 read with Circular No. 3/2018 dated 11.07.2018 as amended on 20.08.2018 as the case falls in the exception provided in para 10(e) of the said instruction in as much as the addition is based on information received from external sources in the nature of law enforcement agencies, namely, “Sales Tax Authorities”. 6. Considered the rival submissions and material placed on record. We notice that the penalty is levied by the AO on the basis of 6% of the alleged bogus purchases sustained by the Ld. CIT(A) in the quantum appeal. It is fact on record that the Ld. Assessing Officer levied the penalty on the income which is estimated and the various Courts have held that the penalty cannot be levied on the income based on estimation. Therefore, we are inclined to agree with the findings of the Ld. CIT(A). Accordingly, the penalty is deleted.

M/s Anmol Toys Pvt. Ltd. 4 & 6235/M/2019

7.

Facts being identical, our decision for the AY 2009-10 applies mutatis mutandis to AY 2010-11.

8.

In the result, the appeals filed by the Revenue are dismissed.

Order pronounced in the open Court on 31/08/2021.

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