ITO 12 (1)91), MUMBAI vs. M/S AMI RIDDHI CHEN PVT LTD., MUMBAI

This is an appeal by the revenue against order dated 25.09.2019 of learned Commissioner of Income Tax (Appeals)–20, Mumbai deleting the penalty imposed of Rs. 11,38,118/- under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11. 3. Briefly the facts are, the assessee, a resident company, is stated to be engaged in the business of importers and traders in pharmaceutical raw materials, fine chemicals, solvent drugs, intermediates and trading in shares and securities. For the assessment year under dispute, the assessee filed its return of income on 19.08.2010 declaring total income of Rs. 10,43,980/-. Subsequently, based on information received from Sales Tax Authorities indicating that the assessee is a beneficiary accommodation bills provided by way of bogus purchases amounting to Rs. 4,60,40,356/-, the Assessing Officer Assessment Year: 2010-11 (AO) reopened the assessment under section 147 of the Act. In course of assessment proceedings, the AO called upon the assessee to prove the genuineness of the aforesaid purchases. Though, the assessee furnished some evidences to claim the purchase as genuine, however, rejecting assessee’s claim the AO completed the assessment by treating the purchases of Rs. 4,60,40,356/-, as non genuine and added back to the income of the assessee. Of course, the Assessing Officer made couple of other additions as well. Assessee contested the aforesaid additions before learned Commissioner (Appeals). Partly accepting the claim of the assessee, learned Commissioner (Appeals) restricted the disallowance to the profit element embedded in the alleged non genuine purchases by estimating at 8%. Thus, he sustained the addition to the extent of Rs. 38,26,419/-. Based on addition sustained by learned Commissioner (Appeals), the AO initiated proceeding for imposition of penalty under section 271(1)(c) of the Act and ultimately passed an order imposing penalty of Rs. 11,82,364/- alleging furnishing of inaccurate particulars of income. While considering assessee’s appeal on the issue, learned Commissioner (Appeals) deleted the penalty imposed on the addition of non-genuine purchases amounting to Rs. 36,83,228/–. Whereas, he sustained penalty imposed on the addition made of Rs.1,43,191/–, being the difference between the ledgers of the assessee and the creditors. 4. We have considered rival submissions and perused the materials on record. It is evident, though, the AO has disallowed certain purchases made by the assessee in the year under consideration by relying upon the information received from Sales Tax Authorities, however, learned Commissioner (Appeals) on examination of facts and materials on record was convinced that the disputed goods, indeed, were purchased by the assessee. Thus, he was of the view that what is in doubt is the source of purchases. For this reason alone, he restricted the disallowance to the profit element embedded in the alleged non- genuine purchases by estimating at 8%. Thus, it is very much clear that the addition leading to the imposition of penalty was made purely on estimate basis by entertaining some doubt regarding the source of purchases. Therefore, Assessment Year: 2010-11 such estimated addition, in our view, cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income. That being the case, learned Commissioner (Appeals) was justified in deleting the penalty imposed under section 271(1)(c) of the Act to that extent. 6. In the result, appeal is dismissed Order pronounced in the open court on 6th August, 2021. (PRAMOD KUMAR) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 06/08/2021