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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI PAVAN KUMAR GADALE
PER S. RIFAUR RAHMAN, A.M.
These appeals have been filed by the Revenue challenging two separate orders both dated 11th July 2019, confirming penalty of ` 81,485, imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") by the Assessing Officer.
When the appeal was called for hearing, no one was present on behalf of the assessee to represent the case. There is no application for adjournment of hearing either. Therefore, we proceed to dispose
2 Rakesh Jitendra Kumar Shah off the appeal ex–parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.
The Revenue has also raised a ground with a request that though the present appeal is below the taxable limit as prescribed in the CBDT Circular no.17/2019, dated 8th August 2018, however, the Revenue has prayed for disposing the appeals on merit. Consequently, we proceed to dispose off these appeals on merit.
Facts in brief:– In the present case, the Assessing Officer completed the assessment under section 144 r/w section 147 of the Act on 9th March 2015, assessing the total income at ` 26,28,650, as against the returned income at ` 5,18,950, after making disallowance under section 69C of the Act at ` 21,09,700. Subsequently, the Assessing Officer vide impugned order dated 9th March 2018, passed under section 271(1)(c) of the Act levied penalty of ` 81,485. The assessee being aggrieved by the penalty order so 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 Co–ordinate Bench. The relevant
3 Rakesh Jitendra Kumar Shah observations of the learned Commissioner (Appeals) deleting the penalty are as follows:–
“6.4 Decision- 6.4.1 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)(c) of the Act at Rs. 81,485/-. The main contentions of the appellant are that he 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 he had submitted necessary evidences in support of his 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 u/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 u/s 69C of the Act at Rs.21,09,700/-. The Ld. CIT(A) had dismissed the appeal filed by the appellant. However, the Hon'ble ITAT has restricted the same to 12.5% 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 Hon'ble ITAT has restricted said addition to 12.5%, on estimated/ad-hoc basis. In the case of M/s Earthmoving Equipment Service Corporation in the Hon'ble ITAT 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 ITAT, 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 an alleged bogus purchases, never made any observations with regard to the incorrectness in details filed by the ass to prove such purchases.
4 Rakesh Jitendra Kumar Shah 6.4.2 From the above it is evident that the facts and circumstances of the present case are similar as to the facts 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. “Rs.81,485/- is DELETED. Accordingly the Ground Nos.1 raised in appeal are ALLOWED.”
The learned Departmental Authorities submitted that the assessee did not purchase any goods from the parties mentioned in the sale bill. The addition was made by the Assessing Officer on the basis of information received from the Sales Tax Department, which had conducted independent enquiries in each of the hawala parties and conclusively proved that these parties are engaged in the business of providing accommodation entries only and accordingly the entire amount of ` 21,09,700, was treated as unexplained expenditure under section 69C of the Act. Consequently, learned Commissioner (Appeals) was not justified in directing to delete the penalty.
Considered the submissions of the learned Departmental Authorities and perused the material on record. As it appears, the Assessing Officer imposed penalty under section 271(1)(c) of the Act on ad–hoc 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 has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad–hoc basis does not result into imposition of 5 Rakesh Jitendra Kumar Shah 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).
The learned Departmental Authorities has not brought any 8. 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.
6 Rakesh Jitendra Kumar Shah 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. 9. Order pronounced in the open court on 02.06.2021