MR. SANJAY H. SHAH,MUMBAI vs. ITO- 17 (3)(2), MUMBAI, MUMBAI

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ITA 6091/MUM/2019Status: DisposedITAT Mumbai18 March 2021AY 2009-103 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty under Section 271(1)(c) cannot be levied on an addition made on an estimated basis. Therefore, the AO was directed to delete the penalty.

What were the facts?

The Assessing Officer (AO) disallowed a portion of purchases on an estimated basis. The Income Tax Appellate Tribunal (ITAT) had previously reduced this disallowance to 5% of the tainted purchases in quantum proceedings. Subsequently, the AO levied penalty under Section 271(1)(c) on this sustained estimated profit.

What were the issues?

Whether penalty under Section 271(1)(c) can be imposed on an addition made on an estimated basis.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘H‘ BENCH

Before: SHRI VIKAS AWASTHY, JM & SHRI M.BALAGANESH, AM

For Appellant: Shri Satyaprakash Singh
For Respondent: Ms. Bharti Singh
Hearing: 18/03/2021Pronounced: 18/03/2021

आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in for A.Y.2009-10, 2010-11 & 2011-12 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-28, Mumbai in appeal No.CIT(A)-28/ITBA- 10148/ITO-17(3)(2)/2018-19, CIT(A)-28/ITBA-10145/ITO-17(3)(2)/2018- 19 & CIT(A)-28/ITBA-10147/ITO-17(3)(2)/2018-19dated 11/09/2019 (ld.

CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961.

2.

The only issue to be decided in these appeals of the assessee is that whether the penalty u/s.271(1)(c) of the Act could be levied on disallowance made on account of bogus purchases on an estimated basis.

3.

We have heard rival submissions and perused the materials available on record. It is not in dispute that the ld. AO had made disallowance @25% of tainted purchases in the assessment which was ultimately brought town to 5% thereon by this Tribunal in the quantum proceedings. Subsequently, the ld. AO had levied penalty for the sustained estimated profit percentage of 5% u/s.271(1)(c) of the Act. Hence, it could be safely concluded that ultimately in the quantum assessment proceedings the disallowance was made only on an estimated basis by estimating profit percentage at 5% of tainted purchases. It is trite law that no penalty u/s.271(1)(c) of the Act could be levied on an addition which has been made on an estimated basis. Hence, we hereby direct the ld. AO to delete the penalty u/s.271(1)(c) of the Act. Accordingly, the grounds raised by the assessee are allowed.

4.

In the result, appeals of the assessee are allowed.

Order pronounced in the open Court on 18/03/2021.

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