Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI PAVAN KUMAR GADALE
The captioned appeal by the Revenue challenging the impugned order dated 17th July 2019, passed by the learned Commissioner (Appeals)–26, Mumbai, directing the Assessing Officer to delete the penalty of ` 2,22,860, imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") by the Assessing Officer for the assessment year 2010–11.
2 M/s. Redstar
Brief facts are, the assessee for the year under consideration has filed its return of income on 14th October 2010, declaring total income of ` 26,07,300. The Assessing Officer completed the assessment determining total income at ` 51,31,980. During the assessment proceedings, the Assessing Officer found that the assessee had made purchases to the extent of ` 34,944 from M/s. Ami Traders and ` 27,98,877, from M/s. R.K. Traders, whose names appear on the website of Sales Tax Department in the list of suspicious dealers wherein the parties are marked as hawala dealers who are merely issuing bills to various parties without actuall purchase and sale of goods having taken place. The Assessing Officer also received information from the DGIT (Inv.), Mumbai, wherein it was seen that the assessee has shown purchases from the concerns whose name is appearing in the list of suspicious dealers as per Sales Tax Department. Thereafter, the case was re–opened under section 143(3) r/w 147 of the Act determining total income at ` 55,03,420, thereby making addition under section 69C of the Act at ` 3,71,437, on account of bogus purchase made by the assessee. The assessee has not contested the quantum addition of ` 3,71,437, made by the Assessing Officer on account of bogus purchase. According to the Assessing Officer, the assessee has concealed the particulars of income and, therefore, imposed penalty of ` 2,22,860, under section 3 M/s. Redstar 271(1)(c) of the Income Tax Act, 1961 (for short "the Act"). The assessee being aggrieved by the issuance of penalty order dated 29th July 2016, passed by the Assessing Officer, filed appeal before the first appellate authority.
The learned Commissioner (Appeals) deleted the penalty so imposed by the Assessing Officer under section 271(1)(c) of the Act by following the decisions of the Hon’ble Karnataka High Court in Naresh Chand Agarwal v/s CIT, 357 ITR 514 (All.). The relevant observations of the Hon’ble Allahabad High Court deleting the penalty are as follows:–
“6. I have considered the facts of the case and the appellant’s submissions. 6.1 The effective ground of the appeal is against levy of penalty of Rs. 2,22,560/- u/s 271(1)(c) of the Act. The AO had added the 12.5% of the bogus purchases at Rs. 3,71,437/- to the total income of the assessee. The appellant did not contest the order of the A0. Subsequently, the A.O. passed the penalty order u/s 271 (1)(c) of the Act for furnishing inaccurate particulars of income and also for concealing the particulars of income by way of bogus claim of expenditure, levying a minimum leviable penalty of Rs.2,22,860/- being 200% of the tax sought to be evaded. 6.2 The AO had added 12.5% bogus purchases and subsequently levied penalty u/s 271(1)(c) of the Act. There are a plethora of court decisions which say that where additions are made on estimation, no penalty u/s 271(1)(c) is leviable, there being no concealment of particulars of income or furnishing of inaccurate particulars of income. In the present case, the purchase had been duly shown by the appellant in its books of accounts but it could not produce the party from whom the purchase had been made.ylt is not the case of the AO that the impugned purchases have been proved to be bogus conclusively and there were no 4 M/s. Redstar corresponding sales, In a recent case before the Allahabad High Court in the case of NareshChand Agarwal vs. CIT, 357 ITR 0514 (All), it has been held that:
“12. In the instant case, nothing was concealed by the assessee. It was the A.O. who has rejected the books of account in the second round and applied the 8% net profit rate prescribed under Section 44 AD. In the instant case, the turnover is more than 40 lacs, so Section 44AD is not applicable, nonetheless the A.O. has inspired with the provision of Section 44AD and made the addition by estimating the net profit rate @ 8%. Rejection of the books of account allowed the A.O. to make the addition on estimate basis. When the addition is made on estimate basis, no penalty under Section 271 (1)(c) of the Income Tax Act, can be imposed as per the ratio laid down in the case of CIT v. Arjun Prasad Ajit Kumar [I.T. Appeal No.13 of 1999, dated 3-1-2008], where it was observed that: "Appeal (High Court)-Substantial question of law-Penalty under section 271(1)(c) CIT (A) deleted penalty under section 271(1)(c) on the ground that there being nothing on record that assessee's explanation lacked bona fides, penalty under section 271(1)(c) could not be imposed on the basis of estimating sales and making addition by applying net profit rate-same was rightly sustained by Tribunal and no substantial question of law arises" On the similar set of facts the Hon’ble ITAT, Mumbai, has deleted penalty u/s 271(1)(c) of the Act in ITA no.5586/Mum./2015, dated 16.01.2017 in the case of DCIT, Cir. 4(2)(2) v/s M/s. Manohar Manak Alloys Pvt. Ltd. On the same lines, the Hon'ble ITAT, Mumbai in dated 08.07.2015 in the case of Mls. Yashraj Films P. Ltd. vs. The A.C.I.T. Central Circle 29, Mumbai has deleted the penalty u/s. 271(1)(c) of the Act levied an addition made on estimation basis. Likewise, the Hon'ble ITAT, Mumbai in ITA No.931Muml2011 dated 10.04.2015 in the case of DCIT 14(2) vs. Mls.Rishabh lmpex Gulabdas & Co. deleted the penalty u/s. 271(1)(c) of the Act levied on addition made on estimation basis. Further, in a recent decision of Delhi ITAT in the case of Shruti Fastners Ltd. vs. DCIT (2017) 49 CCH 0183 Del Trib and ITAT Mumbai in the case of Rekeshrnmer M. Gupta vS.ITO(2017) 49 CHH 0066 Mum Trib, it has been held that where income has been 5 M/s. Redstar estimated, the appellant cannot be said to have concealed particulars of income or furnished inaccurate particulars of income and therefore. penalty u/s 271 (1 )(c) was not leviable.” 6.4 In the background of the aforesaid discussions and respectfully following the precedents, as above and those relied upon by the appellant, I am of the considered view that the appellant has not concealed the particulars of income and nor has it furnished inaccurate particulars of income, there being are no findings of the .A.O that the' details furnished by the appellant in his return are found to be inaccurate or erroneous or false. Accordingly, I delete the penalty of Rs.2,22,860/- levied by the AO u/s 271(1)(c) of the Act and the grounds of appeal are 'Allowed'.”
The Revenue being aggrieved by the aforesaid order of the learned Commissioner (Appeals) filed appeal before the Tribunal.
Considered the submissions of the learned Departmental Authorities and perused the material on record. We find that the assessee has not contested the quantum addition made by the Assessing Officer on account of bogus purchase under section 69C of the Act. It is now well settled that because the assessee has not contested the quantum addition made by the Assessing Officer, the penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income by the Assessing Officer is unsustainable in the eyes of law. We also find The Assessing Officer imposed penalty under section 271(1)(c) of the Act on estimation basis 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
6 M/s. Redstar 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 laws are relied upon:- 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).
Even 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 directing the Assessing Officer to delete the penalty, as there was no concealment of income on the part of the assessee have 7 M/s. Redstar 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. 7. Order pronounced in the open court on 10.06.2021