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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI PAVAN KUMAR GADALE
The captioned appeal has been filed by the Revenue challenging the impugned order dated 26th July 2019, passed by the learned Commissioner (Appeals)–44, Mumbai, deleting penalty of ` 3,15,000, imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") by the Assessing Officer pertaining to the assessment year 2011–12.
The Revenue has also raised a ground with a request that though
2 Rakesh Jitendra Kumar Shah the present appeal is below the taxable limit as prescribed in the CBDT Circular no.17/2019, dated 8th August 2019, however, the Revenue has prayed for disposing the present appeal on merit. Consequently, with the consent of the learned Counsel for the assessee, we proceed to dispose off the Revenue’s appeal on merit.
In the present case, the assessee is engaged in the business of builders and developers. It filed return of income on 25th August 2011, declaring total income at ` 6,47,93,146. The assessment was completed on 3rd March 2014, determining total income of ` 6,74,32,940, after making addition of ` 26,39,791, on account of unexplained investment under section 69C of the Act. This was done by the Assessing Officer on the basis of information received from the Maharashtra Sales Tax Department that the assessee has made transactions with few parties notified as suspicious dealers who have not supplied any actual goods and have issued accommodation entries only. The Assessing Officer also initiated penalty proceedings. The assessee being aggrieved by the addition of ` 26,39,791, on account of unexplained investment under section 69C of the Act, went in appeal before the first appellate authority wherein the learned Commissioner (Appeals) partly allowed the claim of the assessee held that the sales have not been doubted then there was no question to doubt the purchases alone and the addition should have been made
3 Rakesh Jitendra Kumar Shah only to the extent of gross profit. The learned Commissioner (Appeals) held that the assessee has shown a gross profit rate of 38.5% and thus 38.5% of ` 26,39,791 comes to ` 10,16,320, which would be taken as profit of the assessee on purchases that are not fully and properly explained. The assessee’s claim on account of unexplained investment under section 69C of the Act was partly allowed. Consequently, the Assessing Officer proceeded with the penalty proceedings under section 271(1)(c) of the Act and he considered the submissions of the assessee during the penalty proceedings. However, the Assessing Officer was not satisfied with the submissions of the assessee as the assessee had committed default with the meaning of Explanation–1 to provisions of section 271(1)(c) of the Act and is thus liable to be penalized as per the provisions of section 271(1)(c) of the Act. Accordingly, the Assessing Officer levied penalty of ` 3,15,000 under section 271(1)(c) of the Act. Being aggrieved by the penalty order so passed by the Assessing Officer, the assessee filed appeal before the first appellate authority.
The learned Commissioner (Appeals) deleted the penalty of ` 3,15,000, imposed under section 271(1)(c) of the Act by the Assessing Officer. The relevant observations of the learned Commissioner (Appeals) is reproduced below for the sake of brevity:–
4 Rakesh Jitendra Kumar Shah
“7.4 Decision- 7.4.1 I have considered the submissions of the appellant and perused the materials available on record. The appellant has requested to delete the impugned penalty levied u/s 271 (1 )(e) of the Act at Rs. 3,15,000/-. The main contentions of the appellant are that it has neither concealed particulars of income nor furnished inaccurate particulars of income; mere rejection of appellant's claim would not automatically lead to levy of penalty and it had submitted necessary evidences in support of its claim, but the same was not accepted by the Ld. AO and where the addition has been made or sustained on estimation basis the penalty v/s 271(1)(c) of the Act is not leviable. In support of its claim the appellant has placed reliance on various judicial precedents as detailed above. The contentions of the appellant have been considered carefully. The Ld. AO had made the addition on account of bogus purchases at RS.26,39,791/-. However, the Ld. ClT(A) has restricted the same to 38.5% of such purchases/ accommodation entries. The facts of the case suggest that the Ld. AO had made said addition on the ground that the appellant could not prove the purchases under consideration from the parties concerned. It is also an admitted fact that the Ld. ClT(A) has restricted said addition to 38.5%, on estimated/ad-hoc basis. In the case of M/s Earthmoving Equipment Service Corporation in the Hon'ble IT AT Mumbai vide its order dated 02.05.2017 has deleted the penalty levied u/s 271 (1 )(c) of the Act, where the addition u/s 69C of the Act was made on account of bogus purchases, on the ground that the assessee made a claim which was bonafide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers as they could not be traced at given address. Further, the Hon'ble IT AT, Mumbai in the case of Ajay Loknath Lohia in ITA No. 2998/Mum/2017, vide its order dated 05.10.2018 has deleted the penalty levied u/s 271(1)(c) of the Act, on the disallowance/addition made @ 25% on alleged bogus purchases made from hawala dealers based on the information received from the Sales Tax Department and where the appellant had accepted such estimated addition, after holding that though the AO had estimated 25% gross profit on alleged bogus purchases, never made any observations with regard to the incorrectness in details filed by the assessee to prove such purchases. 7.4.2 From the above it is evident that the facts and circumstances of the present case are similar as to the facts
5 Rakesh Jitendra Kumar Shah adjudicated by the Hon'ble ITAT Mumbai in above referred cases. Respectfully following the same, I am of the considered opinion that this is not a fit case to levy penalty u/s 271(1)(c) of the Act. Hence, the impugned penalty levied u/s 271(1)(c) at Rs. 3,15,000/- is DELETED. Accordingly the Ground Nos. 2 and 3 raised in appeal are ALLOWED.
The Revenue being aggrieved by the aforesaid order passed by the learned Commissioner (Appeals), is in appeal before the Tribunal.
Considered the submissions of the learned Departmental Authorities and perused the material on record. We find that the Assessing Officer levied penalty under section 271(1)(c) of the Act on ad–hoc disallowance under section 69C of the Act without adducing any evidence on record for concealment of income. Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad–hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. We find support from the series of decisions by different High Courts as well the decision of the Co–ordinate Benches of the Tribunal, wherein it was held that when addition is made on estimate basis, penalty is not sustainable in the eyes of law. In support of this contention, following case law are relied upon:-
6 Rakesh Jitendra Kumar Shah i) CIT v/s Norton Electronics Systems (P) Ltd. [2014] 41 taxmann.com 280 (Allahabad HC); ii) ACIT v/s Vision Research Management (P) Ltd., [2015] 63 taxmann.com 8 (Lucknow) (Trib.); iii) Prem Chand v/s ACIT, [2014] 52 taxmann.com 95 (Chandigarh) (Trib.); iv) CIT v/s PHI Seeds India Ltd., [2008] 301 ITR 0013 (Del); and v) Dilip N. Shroff v/s JCIT [2007] 291 ITR 519 (SC).
The learned Departmental Authorities has not brought any cogent material to prove otherwise warranting interference at the instance of the Revenue. In this view of the matter, we are of the considered view that the learned Commissioner (Appeals) was indeed justified in deleting the penalty, as there was no concealment of income on the part of the assessee have been proved by the Revenue and additions made on estimation by the Assessing Officer do not call for initiation of penalty. Consequently, we uphold the order passed by the learned Commissioner (Appeals) by dismissing the grounds of appeal raised by the Revenue.
In the result, Revenue’s appeal is dismissed. Order pronounced in the open court on 10.06.2021