ACIT-28(3), MUMBAI vs. SHRI SHREEKANT GWALDAS DAMANI, MUMBAI

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ITA 5191/MUM/2019Status: DisposedITAT Mumbai22 February 20215 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that since the addition was made purely on an estimate basis due to doubts about the source of purchases, it cannot be concluded that the assessee concealed income or furnished inaccurate particulars. Therefore, no penalty under Section 271(1)(c) can be imposed.

What were the facts?

The Assessing Officer reopened the assessment based on information that purchases from two parties were non-genuine. While the AO treated the purchases as non-genuine, he disallowed only 12.5% of the amount, leading to a penalty under Section 271(1)(c). The CIT(A) deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be imposed when the addition is based on an estimated disallowance of purchases due to doubts about their genuineness.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY & SHRI N.K.PRADHAN

O R D E R Per Saktijit Dey (JM) This is an appeal by the revenue against order dated 15-05-2019 of learned Commissioner of Income-tax (Appeals)-26, Mumbai deleting the penalty imposed under section 271(1)(c) of the Act for the assessment year 2011-12.

2.

When the appeal was called for hearing, no one was present for the assessee. Considering the nature of dispute, we proceeded to dispose of the appeal ex parte qua the assessee after hearing the learned Departmental Representative and on the basis of material available on record.

3.

Briefly the facts are, the assessee is an individual. For the assessment year under dispute, the assessee filed his return of income on 30-09-2011 declaring total income of Rs.31,03,750/-. Subsequently, the Assessing Officer received information from the Investigation Wing that purchases worth Rs15,99,557/- shown to have been made from two parties are non genuine, the Assessing Officer reopened the assessment under section 147 of the Act. In course of assessment proceedings, the Assessing Officer noticed that as per the information received, the two parties from whom the assessee claimed to have purchased the goods have been identified by the sales-tax department as hawala operators providing bills without entering into actual transaction. Therefore, he called upon the assessee to prove the genuineness of purchases through proper evidence. Alleging that the assessee failed to furnish cogent evidence to prove the genuineness, the assessing officer treated the purchases of Rs.15,99,557/- as non genuine. However, instead of disallowing the entire purchases, he disallowed an amount of Rs.1,99,945/-, being 12.5% of the alleged non genuine purchases. On the basis of such disallowance / addition, the assessing officer initiated proceedings for imposition of penalty under section 271(1)(c) of the Act alleging concealment of income and furnishing inaccurate particulars of income and ultimately passed an order imposing penalty of Rs.61,784/-. Against the penalty order so passed, assessee preferred appeal before learned Commissioner (Appeals). After considering the submissions of the assessee in the context of facts and materials on record, learned Commissioner (Appeals) deleted the penalty imposed under section 271(1)(c) of the Act.

4.

We have considered the submissions of learned Departmental Representative and perused the materials on record. As could be seen from the facts on record, though, the assessing officer has doubted the source of the disputed purchases; however, he was convinced that the goods representing such purchases were in possession of the assessee and the assessee had effected corresponding sales. For this reason alone, the assessing Officer instead of disallowing the entire purchases, has restricted the disallowance to 12.5% of the alleged non genuine purchases. Thus, as could be seen, the addition on the basis of which penalty under section 271(1)(c) of the Act has been imposed, was made purely on estimate basis by entertaining doubt regarding the source of purchase. Therefore, any addition / disallowance made on purely estimate basis by entertaining doubts and presumption would not lead to the conclusion that the assessee has either concealed his income or furnished inaccurate particulars of income. That being the case, no penalty under section 271(1)(c) of the Act can be imposed. Therefore, we uphold the decision of learned Commissioner (Appeals) in deleting the penalty imposed under section 271(1)(c) of the Act.

5.

Having held so, there is one more aspect to the issue. Undisputedly, the tax effect on the amount disputed by the revenue in the present appeal is below the monetary limit of Rs.50 lakhs prescribed by the Centra Board of Direct Taxes (CBDT) in circular No. 17/2019 dated 8th August, 2019. In our considered opinion, the appeal filed by the revenue since involves the issue of imposition of penalty under section 271(1)(c) of the Act, will not be protected under any of the exceptions provided in the CBDT circular referred to above. Therefore, for this reason also, the present appeal of the revenue deserves to be dismissed. Grounds are dismissed.

6.

In the result, appeal is dismissed.

Order pronounced on this 22/02/2021

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