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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
These two appeals by the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-1, Thane ( in short ‘the CIT(A)’) for the assessment years 2010-11 and 2011-12, respectively. Both the impugned orders (A.Y.2010-11) (A.Y.2011-12) are of even date i.e. 15/05/2019. Since, both these appeals germinate from same set of facts, these appeals are taken up together for adjudication and are decided by a common order.
Ms. Usha Gaikwad, representing the Department submitted that these appeals have been filed by the Department assailing the findings of CIT(A) in deleting the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 ( in short ‘the Act’). The ld.Departmental Representative submitted that in assessment proceedings the Assessing Officer made addition on account of bogus purchases. The penalty under section 271(1)(c) of the Act was also initiated for furnishing inaccurate particulars of income. The Assessing Officer levied penalty of Rs.38,044/- in assessment year 2010-11 and Rs.61,309/- in assessment year 2011-12 on addition resulting from bogus purchases. The ld.Departmental Representative submitted that though the tax effect involved in the present appeal is less than the monitory limit prescribed by CBDT vide Circular No. 17/2019, dated 08-08-2019 but the case of assessee falls under exception specified in para 10(e) of Circular No. 03 of 2018 dated 11/07/2018 and amended on 20/08/2018.
The ld.Departmental Representative submitted that the assessee has agreed for the addition in both the impugned assessment years, therefore, the penalty was rightly levied by the Assessing Officer. The CIT(A) has deleted the penalty by placing reliance on the decisions of Tribunal and the judgment of Hon'ble Supreme Court of India in the case of CIT vs. Reliance Petroproducts (P) Ltd.,322 ITR 158(SC). The ratio of said judgment does not apply in the facts of present case. (A.Y.2010-11) (A.Y.2011-12)
We have heard the submissions made by ld.Departmental Representative and have examined the orders of authorities below. A perusal of the assessment order reveals that the addition has been made on account of bogus purchases by estimating escaped profit embedded in alleged bogus purchases. Apparently, the assessee accepted the addition and has not litigated further before the higher forums. It is an accepted legal position that no penalty under section 271(1)(c) of the Act is sustainable on additions that have been made merely on the basis of estimations. Further, no penalty under section 271(1)(c) of the Act can be levied merely for the reason that the assessee has accepted the addition. Levy of penalty under section 271(1)(c) of the Act is not automatic. Penalty proceedings are distinct and separate from assessment proceedings. The finding given in assessment proceedings are not conclusive so far as the penalty proceedings are concerned. In the present case we find that the Assessing Officer while making the addition on account of bogus purchases has not given a definite finding of fact regarding the amount concealed or inaccurate particulars of income in the return of income. The Assessing Officer made addition by estimatingprofit that ostensibly escaped tax net.
The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Sangurur Vanaspati Mills Ltd.,303 ITR 53(P&H) has held that where addition has been made on the basis of estimation and not on account of any concrete evidence of concealment, penalty under section 271(1)(c) of the Act cannot be invoked.
The Hon’ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading Industries, reported as 360 ITR 581(Raj), taking a similar view held that where estimated additions are made, no penalty is leviable under section 271(1)(c) of the Act. Thus, in the light of the facts of the case and the decisions (A.Y.2010-11) (A.Y.2011-12) referred above, we find no infirmity in the impugned orders of CIT(A) for respective assessment years deleting penalty. Therefore, the same are upheld and both the appeals of the Revenue are dismissed sans merit.
In the result, appeals by the Revenue are dismissed.
Order pronounced in the open court on Wednesday, the 17th day of February, 2021.