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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
आदेश / O R D E R भहावीय स िंह, उऩाध्मक्ष के द्वाया / PER MAHAVIR SINGH, VP: These appeals of assessee are arising out of orders of the Commissioner of Income Tax (Appeals)]-44, Mumbai [in short CIT(A)], in Appeal Nos. CIT(A)-44/ITO-32(1)(4)/IT-26/18-19 vide dated 01.10.2019. The Assessment was framed by the Income Tax Officer, Ward-25(1)(4), Mumbai (in short ITO / AO) for the A.Y. 2010-11 vide even date 19.03.2013 under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’). The penalty was by
2. The only common issue in this appeal 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 following grounds:-
“1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961, of ₹ 89,341/- without appreciating the facts that the Assessing Officer has correctly held that the assessee has failed to substantiate the transactions claimed in its return of income thereby evaded taxes to that extent.
On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the act of assessee clearly falls within the ambit of provisions of Explanation-1 to section 271(1)(c) of the Act as the assessee has failed to offer an explanation or which was found by the Assessing Officer to be false.
On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the I.T. Act, 1961 of ₹ 89,341/- without appreciating the facts that the assessee claimed bogus purchases in its Return of Income thereby making himself liable for penalty under section 271(1)(c) of the I.T. Act, 1961.”
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the AO made addition of whole amount as unproved purchase at ₹24,94,614/- to the return income of the assessee but CIT(A) restricted to the profit element by “6. It may be noted that in the next assessment year 2001-02, the total amount claimed by the assessee under the head "Provision for obsolescence of inventory" was Rs. 35,575. While the Assessing Officer disallowed the entire amount, the Commissioner of Income-tax (Appeals) reduced the disallowance to 25 per cent. thereof, amounting to Rs. 8,894. The said disallowance
The Tribunal, while dealing with the question of penalty under section 271(1)(c) on the ground of obsolescence, has held as under (page 801 of 10 ITR (Trib) :
"We have heard both the parties and have carefully gone through the orders of the authorities below.
It is not in dispute that disallowance has been made by the Revenue only to the extent of 25 per cent. of the total claim on account of provision for obsolescences of inventory amounting to Rs.4,94,66,656. In other words, the Assessing Officer has allowed 75 per cent. of the claim and disallowed only 25 per cent. thereof.
The Assessing Officer has disallowed 25 per cent. of the claim on the ground that the old model could easily be sold in the market to the customers since the customers of this line also purchased old model even after launching new model in the market. This makes it clear that the
Looking at the reasoning given by the Income-tax Appellate Tribunal, nature of disallowance and the finding of the Assessing Officer/Commissioner of Income-tax (Appeals) making ad hoc disallowance of 25 per cent., we do not think any substantial question of law arises in the present appeals and the same are accordingly dismissed.”