INCOME TAX OFFICER-12(3) (3), MUMBAI , MUMBAI vs. MAHALAXMI DYES AND CHEMICALS LIMITED, MUMBAI

Brief facts of the case are that the assessee filed its return of income for AY 2011-12 on 27.09.2011 declaring total income at Rs. 29,54,720/-. The assessment was completed u/s. 143(3) on 27.03.2014 determining the total income of the assessee at Rs. 1,28,85,420/-. In the assessment order the AO made disallowances of Rs. 99,20,023/-. The disallowance made by the AO included disallowance of purchases of Rs. 99,20,023/- made on the ground that the claim of purchases was bogus. On appeal filed by the assessee, the CIT(A), by his order dated 30.12.2015 restricted the disallowance of to Rs. 99,200/-, being 1% of the purchases held to be bogus in the assessment order. The order of the CIT(A) was subsequently confirmed by the Hon'ble ITAT in its order dated 07.07.2017 (ITA No. 1792/Mum/2016). In the course of the 2 M/s. Mahalaxmi Dyes and Chemicals Limited assessment proceedings, the AO initiated penalty proceedings u/s. 271(l)(c) of the Act. Accordingly, he issued notice u/s. 271(1)(c) of the Act calling upon the assessee to show cause why penalty u/s. 271(1)(c) should not be imposed in its case. Eventually, the AO passed the impugned order u/s. 271(1)(c) of the Act. In that order the AO held that the assessee had filed inaccurate particulars of income in respect of the sum of Rs. 99,200/-. Based on his findings, the Assessing Officer imposed penalty of Rs. 30,652/-. Aggrieved the assessee filed appeal.

Upon assessee’s appeal learned CIT(A) deleted the penalty placing reliance upon several case laws.

Against this order revenue is in appeal before us.

We have heard learned Departmental Representative and perused the records. As clear from the facts recorded above, the disallowance has been made on an estimated basis on account of the nonproduction of suppliers before the assessing officer. The purchase vouchers were duly produced and the payments were through banking channel. In these backgrounds in our considered opinion assessee cannot be visited with the rigours of penalty under section 271(1)(c) of the Act. As a matter of fact on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted. In our considered opinion on the facts and circumstances of the case assessee cannot be said to have been guilty of concealment or furnishing of inaccurate particulars of income. In this regard we draw support from the decision of a larger bench of the honourable Supreme Court in the case of the Hindustan Steel Ltd. Vs. State of Orissa (83 ITR 26), where in it was held that the authority may no t levy the penalty if the conduct of the assessee is not found to be contumacious.

We further note that tax effect in this case is below the limit fixed by CBDT for filing appeals before ITAT. The revenue has tried to make out a case

In the background of aforesaid discussion and precedent we uphold the order's of Ld CITA and delete the levy of penalty.

In the result revenue's appeal is dismissed.