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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI PAVAN KUMAR GADALE
Date of Hearing 08.06.2021 Date of Pronouncement 11.06.2021 आदेश / O R D E R
PER PAVAN KUMAR GADALE, JM:
The appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) -2, Mumbai, passed u/s. 271(1)(c)r.w.274 and 250 of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal:
1 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty of Rs. 45,48,081/- made u/s 271(1)(c) of the Act ignoring the enquiries Benite Steels Ltd., Mumbai - 2 - made and factual details brought on record by the AO to conclude that the assessee failed to discharge its onus to establish the genuineness of the purchase and identity of the parties from whom the assessee made purchases and hence, the AO established these to be none genuine.
The Brief facts of the case are that, the assessee company is engaged in the business of steel industry. The assessee has filed the return of income for the A.Y 2009-10 of Rs. 1,43,838/-.Whereas, the A.O has received the information from the Sales Tax Department, Maharashtra that there are several parties providing bogus purchase bills to many beneficiaries and the assessee company is one of the beneficiary, which has obtained the bogus purchase bills from the four parties aggregating to Rs. 10,70,45,159/-.Based on the information, the A.O has issued notice u/s 148 of the Act on 14.03.2013. After considering the facts and explanations the A.O has issued summons u/s 131 of the Act on these parties and was returned back by the postal authorities as un-severed. The A.O was not satisfied with the information and the assessee has failed to prove the genuineness of the purchases in spite of providing adequate opportunities.
Benite Steels Ltd., Mumbai - 3 - Therefore, the AO has observed that the purchases are not genuine and made addition of bogus purchases as unexplained expenditure u/Sec 69C of the Act and passed the order u/s 143(3) r.w.s 147 of the Act on 24.03.2014. Subsequently, the A.O. has initiated penalty proceedings u/s 271(1)(c) of the Act. The A.O in the penalty proceedings considered the findings of the scrutiny assessment and found that the assessee has failed to prove the genuineness of the transactions. Further it was brought to the knowledge of the A.O. that against the quantum addition, the assessee has filed an appeal to the CIT(A). The appellate authority relied on the Coordinate bench of Honble Tribunal decisions and restricted the addition to the extent of 12.5% of the bogus purchases i.e Rs1,33,80,645/-. The A.O has provided opportunity to submit explanations but the assessee for various reasons could not appear in the penalty proceedings. Finally, the A.O has levied penalty u/s 271(1)(c) of the Act of Rs. 45,45,081/- and passed the order u/s 271(1)(c) of the Act on 31.03.2017.
Benite Steels Ltd., Mumbai - 4 -
Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A), the CIT(A) has considered the grounds of appeal, findings of the A.O and the submissions of the assessee and observed that the A.O has made addition of 100% bogus purchases in the scrutiny assessment U/sec143(3) r.w.s Sec147 of the Act.
Whereas, the Ld.CIT(A) has restricted the addition by estimating gross profit/income @ 12.5%. But the A.O has levied the penalty u/sec 271(1)(c) of the Act on the estimated income. The CIT(A) dealt on the provisions of Sec. 271(1)(c) of the Act and relied on the Coordinate Bench of Hon’ble Tribunal and the Hon’ble High Court decisions and observed that no penalty can be levied on estimated income and directed the A.O to delete the penalty and allowed the assessee’s appeal. Aggrieved by the order of the CIT(A),the revenue has filed an appeal with the Hon’ble Tribunal.
At the time of hearing None appeared on behalf of the assessee. Contra, the Ld. DR submitted that the CIT(A) erred in deleting the penalty, whereas the A.O has received the information that, the assessee has Benite Steels Ltd., Mumbai - 5 - obtained bogus purchase bills and the same could not be overlooked and prayed for allowing the revenue appeal.
We heard the Ld.DR submissions and perused the material on record. The sole crux of the disputed issue as envisaged by the Ld. DR that the CIT(A) has erred in deleting the penalty overlooking the facts of bogus purchases. Whereas, the Ld.CIT(A) considering the facts and circumstances observed that the penalty cannot be levied on estimated income. We find that the CIT(A) has estimated income/ gross profit @ 12.5% on bogus purchases. The A.O. has accepted the sales in the books of accounts.
We are of the opinion that when the addition is on estimated basis, penalty u/s 271(1)(c) of the Act cannot be levied on such adhoc estimated income. The disallowance of purchases on ad-hoc basis does not tantamount to furnishing inaccurate particulars of income under the provisions of Section 271(1) (c) of the Act. The Ld.DR could not controvert the findings of the CIT(A) with any new cogent evidence or information. Accordingly, we are not inclined to interfere with the order of the Ld.CIT(A) and upheld Benite Steels Ltd., Mumbai - 6 - the same and dismiss the grounds of appeal of the revenue.
In the result, the appeal filed by the revenue is dismissed.