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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI S. RIFAUR RAHMAN
The present appeal preferred by the Revenue challenging the impugned order dated 29th March 2019, passed by the learned Commissioner (Appeals) deleting penalty of ` 34,78,910, 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.
Facts in brief:– In the present case, the assessee being an individual for the year under consideration filed its return of income on 2 Shri Dharmesh Vinaykumar Shah 15th October 2010, declaring total income of ` 4,84,910. The Assessing Officer completed the assessment after making addition of ` 4,27,80,407 under section 69C of the Act on account of bogus purchase on the ground that the assessee failed to substantiate its claim of purchases from some parties. The assessee being aggrieved by the order so passed by the Assessing Officer carried the matter before the first appellate authority wherein the learned Commissioner (Appeals) restricted the addition on account of bogus purchase @ 25% of the addition which works out to ` 1,06,95,102 i.e., 25% of ` 4,27,80,407. Consequently, the Assessing Officer, vide order dated 29th March 2015, initiated penalty proceedings under section 271(1)(c) of the Act imposing penalty of ` 34,78,910. The assessee being aggrieved carried the matter before the first appellate authority for contesting the issue of penalty imposed under section 271(1)(c) of the Act.
The learned Commissioner (Appeals) cancelled the penalty by observing as follows:–
“4.3.1 I find that in the assessment order as well as in the notice issued u/s 274 read with section 271(1)(c), the AO failed to specify which limb of section 271(1)(c) , the penalty was initiated. I find that in the assessment order passed u/s.143(3) of the Act on 28.03.2013, the AO did not specify under which limb of section 271(1)(c) the AO had initiated the penalty proceedings. In that order, the AO has simply stated that "Penalty proceedings u/s 271(1)(c) are initiated separately for furnishing inaccurate particulars of income and 3 Shri Dharmesh Vinaykumar Shah concealment of income thereof." I also find that the AO did not strike off the irrelevant portion in the notice issued on 28.03.2013 u/s.274 r.w.s. 271(1)(c) of the Act. In omitting to do so, the AO failed to specify the limb under which the penalty proceedings were initiated. In my view, since the limb under which the penalty was initiated was not specified, the appellant was not given an meaningful opportunity to defend its case. Reliance is placed on the decision of the Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra). The penalty imposed is not sustainable. Therefore, I cancel the penalty order. In the result, the Ground of appeal No. 1 is treated as allowed.”
The Revenue being aggrieved by the aforesaid order passed by the learned Commissioner (Appeals) is in appeal before the Tribunal.
The learned Departmental Authorities, before us, supported the penalty order passed by the Assessing Officer.
The learned Counsel for the assessee submitted that the show casue notice issued by the Assessing Officer under section 274 r/w section 271 of the Act wherein it was not specified by the Assessing Officer as to whether the penalty proceedings under section 271(1)(c) of the Act was initiated for furnishing inaccurate particulars of income or concealment of particulars of income and, hence, the penalty order passed by the Assessing Officer is invalid and void ab initio.
Considered rival submissions and perused the material on record. As it transpires from the facts on record, the Assessing Officer has imposed penalty under section 271(1)(c) of the Act on ad–hoc basis without adducing any evidence on record for concealment of income or filing of 4 Shri Dharmesh Vinaykumar Shah inaccurate particulars of income. In our considered opinion, 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 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 7. 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 5 Shri Dharmesh Vinaykumar Shah 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. 8. Order pronounced in the open court on 31.05.2021