M/S SHER MOHAMMED & CO,MUMBAI vs. ACIT WARD-26(3), MUMBAI, MUMBAI

The notice of appeal was sent to the assessee through RPAD on 19.02.2021 for appearance on 18.03.2021. As per the acknowledgement available on record, the notice was duly served on the assessee. Despite service of notice, neither the assessee/appellant nor any Authorised Representative (AR) of the assessee has appeared in the Court. No request seeking adjournment has either been received. It appears that the assessee is no keen to pursue his appeal before the Tribunal. Therefore, the appeal is taken up for hearing with the assistance of ld. Departmental Representative and material available on record.

Ms. Bharti Singh representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. DR submitted that the assessee has failed to discharge its onus in proving genuineness of the purchases and the dealers from whom bogus purchase bills were procured by the assessee. The CIT(A) has rightly rejected various contentions raised by the assessee including levy of penalty on estimated additions.

We have heard the submissions made by ld. DR and have examined the orders of authorities below. Undisputedly, the addition in the case of asessee was made by the AO on account of alleged bogus purchases from hawala dealers. The AO disallowed 12.5% of total purchases and made addition of Rs. 19,00,771/-. The assessee assailed the addition before the CIT(A). The CIT(A) restricted the addition to Rs. 12,16,494/- by estimating Gross Profit (GP) at the rate of 8%. The AO levied penalty under section 271(1)(c) of the Act on the estimated addition confirmed by CIT(A). The AO vide order dated 21.03.2018 levied penalty of R. 3,75,897/-.

On perusal of penalty order dated 21.03.2018, we find that the assessee had made a categoric submission that no penalty under section 271(1)(c) of the Act is to be imposed on estimated additions. To support this contention reliance was placed on following decisions:

Undisputedly, in the present case addition was made on estimation of GP on bogus purchases, there are several decisions by Hon’ble High Courts in support of the view that no penalty under section 271(1)(c) is to be levied where addition is made on estimation basis.

The Hon’ble Delhi High Court in the case of CIT vs. Aero Traders Pvt. Ltd. reported as 322 ITR 326 has held that no penalty under section 271(1)(c) of the Act can be imposed where the income is determined on estimate basis. Penalty

There are other catina of judgments by various Hon’ble High Courts in support of the view that no penalty under section 271(1)(c) of the Act, can be levied on estimated additions. The CIT(A) has relied on some of the decisions of the Hon’ble High Courts where contrary view has been taken. No judgment of Hon’ble Jurisdictional High Court on this issue has been brought to our notice. Under such circumstances, the Hon’ble Bombay High Court in the case of K. Subramanian v/s Siemens India Ltd. reported as 156 ITR 11 has held that when two conflicting decisions of non-jurisdictional High Courts are available, the view that favours the assessee is to be preferred.

Thus, in the light of decisions discussed above and the facts of the case, we reverse the findings of the CIT(A) and delete penalty levied under section आअसं. 5986/मुं/2019 (िन.व.2009-10) (A.Y.2009-10)