ITO-12(3)(3), MUMBAI, MUMBAI vs. M/S. MAINFRAME COMPUTERS PVT. LTD., MUMBAI

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ITA 6084/MUM/2019Status: DisposedITAT Mumbai01 July 2021AY 2009-103 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 under Section 271(1)(c) is not leviable on estimated disallowances when purchase vouchers and banking channel payments are duly produced. The assessee cannot be considered guilty of concealment or furnishing inaccurate particulars in such circumstances.

What were the facts?

The Assessing Officer made disallowances for bogus purchases based on the non-production of suppliers, despite the assessee providing purchase vouchers and proof of payment through banking channels. The CIT(A) restricted the disallowance and deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on estimated disallowances made due to non-production of suppliers, despite supporting documentation for purchases and payments.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM & C.N.PRASAD , JM

For Appellant: Shri Bharat Andhale
Hearing: 20.04.2021Pronounced: 01.07.2021

O R D E R Per Bench.:

These appeals by the revenue are directed against the order of the learned Commissioner of Income Tax (Appeals)-20, Mumbai (‘ld.CIT(A) for short) dated 28.06.2019 and pertains to the assessment years (A.Y.) 2009-10,2010-11 & 2011- 12, wherein following penalty levied under section 271(1)(c) of the I.T.Act, 1961 has been deleted:- Sr.No Assessment Year Amount of penalty 1 2009-10 12,828/- 2 2010-11 38,692/- 3 2011-12 17,667/-

2.

Since the issues and facts are connected, these are being disposed of by this common order.

3.

The brief facts of the case are leading to the levy of penalty are that the assessing officer in these cases made disallowances of on account of bogus purchase.

2 6084-6086/Mum/2019 Assessee has supplied the purchase vouchers and the payment, where shown to have been made by banking channel. However, drawing adverse inference for the non production of the suppliers , the assessing officer disallowed the peak credit involved in such purchases. However, he assessing officer did not doubt the sales, the Ld.CIT(a) restricted the disallowance to 4% of the alleged bogus purchases. Penalty u/s 271(1)(c) was also levied. The Ld.CIT(A) deleted the penalty referring to couple of case laws for the proposition that penalty is not leviable on such estimated disallowances.

4.

Against this order revenue is in appeal before us.

5.

We have heard the Ld. DR and perused the records. As clear from the fats recorded above, the disallowance has been made on an estimated basis on account of the non production 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). 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 Hon’ble Supreme Court in the case of the State of Orissa 82 ITR 26, where in it was held that the authority may not levy the penalty, if the conduct of the assesee is not found to be contumacious.

6.

We further note that tax effect in this case is below the limit fixed by the CBDT for filing appeals before ITAT. The revenue has tried to make out a case that since the addition was made pursuant to information from Sales tax department, this penalty appeal falls in the exception carved out in the CBDT circular regarding appeals arising out of additions made pursuant to information from outside agencies. We are 3 6084-6086/Mum/2019 of the opinion that this plea is not tenable inasmuch as once revenue accepts that penalty is levied on outside agency information, the penalty levied will have no legs to stand.

7.

In the background of aforesaid discussion and precedent, we uphold the order’s of the Ld.CIT(A) and delete the levy of penalty.

8.

In the result, revenue’s appeals are dismissed.

Order pronounced in the open court on 01.07.2021

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