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Income Tax Appellate Tribunal, “G” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
This appeal by the Revenue is against order's learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] wherein following penalty levied under 271(1)(c) of the Income Tax Act (in short ‘Act’) has been confirmed as under :- assessment year amount of penalty 2011-12 1,20,660/-
Brief facts of the case leading to the levy of penalty are that the Assessing Officer in this case made disallowance of 12.5% on account of bogus purchases. Assessee has supplied the purchase vouchers and the payment where shown to have been made by banking channel. However drawing adverse inference for the non-production of the suppliers the assessing officer disallowed 12.5% of the bogus purchases. However the assessing officer did
2 M/s. Singh Infrastructure Developers not doubt the sales. The learned CIT(A) confirmed the addition. Penalty under section 271(1)(c) of the Act was also levied. Ld CIT(A) deleted the penalty holding as under :- 6. The Supreme Court has recently reiterated the law in case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 by holding in para 62 that finding in assessment proceedings cannot automatically adopted in penalty proceedings and the authorities have to consider the matter afresh from different angle. Moreover, in the case of Ajay Loknath Lohia, order dated 5.10.2018, Mumbai ITAT has addressed that when AO had estimated cost GP on alleged purchases, such disallowance does not tantamount to willful furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Income Tax , 1961. This was also echoed in the case of ETCO Profiles Pvt. Ltd. vs. ACIT, Mumbai ITAT.
7. In the case of CIT v. Reliance Petro Products (P) Ltd. (2010) 312 ITR 158 (SC) it was held as under:
"We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature".
The levy of penalty is merely on disallowance of purchases and not finding of concealment of any particular or mala-fide intention to reduce taxable income. Addition made on account of disallowance of purchases as bogus automatically cannot justify the penalty levied u/s 271(1)(c) of the Act. Accordingly, the penalty of Rs. 1,20,660/-, imposed u/s 271(1)(c) of the IT. Act, by the AO, is hereby deleted and the ground of appeal, raised as above, is allowed.”
Against this order Revenue is in appeal before us.
We have heard Ld DR and perused the records. As clear from the facts recorded above the disallowance has been made on an estimated basis on account of the non-production of suppliers before the assessing officer. The purchase vouchers were duly produced and the payments were through banking channel. In these backgrounds in our considered opinion assessee
3 M/s. Singh Infrastructure Developers cannot be visited with the regours of penalty under section 271(1)(c) of the Act. As a matter of fact on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted. In our considered opinion on the facts and circumstances of the case assessee cannot be said to have been guilty of concealment or furnishing of inaccurate particulars of income. In this regard we draw support from the decision of a larger bench of the honourable Supreme Court in the case of the Hindustan Steel Ltd. Vs. State of Orissa (83 ITR 26) where in it was held that the authority may no t levy the penalty if the conduct of the assessee is not found to be contumacious.
We further note that tax effect in this case is below the limit fixed by CBDT for filing appeals before ITAT. The revenue has tried to make out a case that since the addition was made pursuant to information from Sales Tax Department, this penalty appeal falls in the exception carved out in the CBDT circular regarding appeals arising out of additions made pursuant to information from outside agencies. We are of the opinion that this plea is not tenable inasmuch as once revenue accepts that penalty is levied on outside agency information ,the penalty levied will have no legs to stand.
In the background of aforesaid discussion and precedent we uphold the order's of Ld CIT(A) and delete the levy of penalty.
In the result revenues 's appeal is dismissed.
Pronounced in the open court on 9.3.2021.