ITO WARD1(4), THANE WEST vs. SMT. JAY NARESH PURSWANI, THANE

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ITA 5048/MUM/2019Status: DisposedITAT Mumbai17 February 2021AY 2010-114 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 penalty under Section 271(1)(c) cannot be levied on additions made purely on estimation. Since the CIT(A) had restricted the addition to 12.5% of alleged bogus purchases by estimating escaped profit, the penalty was unsustainable.

What were the facts?

The Revenue appealed against the deletion of penalty under Section 271(1)(c) by the CIT(A). The Assessing Officer had made additions for bogus purchases and initiated penalty proceedings for furnishing inaccurate particulars.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on additions made on estimation basis, especially when the original addition was restricted by the appellate authority.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI PRAMOD KUMAR & SHRI VIKAS AWASTHYSmt.Jaya Naresh Purswani,

For Respondent: Ms. Usha Gaikwad
Hearing: 04/02/2021Pronounced: 17/02/2021

आदेश/ ORDER

PER VIKAS AWASTHY,JM:

1.

These two appeals by the Revenue are directed against the orders of Commissioner of Income Tax Appeals-1, Thane [in short ‘CIT(A)’] for the assessment years 2010-11 and 2011-12, respectively. Both the impugned orders

(A.Y.2010-11) ITA NO.5049/MUM/2019(A.Y.2011-12) are of even date i.e. 07/05/2019. Since, both these appeals germinate from same set of facts, these appeals are taken up together for adjudication and are decided by this common order.

2.

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. 1,43,952/- in assessment year 2010-11 and Rs. 46,894/- 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.

3.

The ld.Departmental Representative submitted that the assessee failed to substantiate genuineness of the purchases in both the impugned assessment years, hence, addition was made in respect of bogus purchases. The penalty was rightly levied by the Assessing Officer for furnishing inaccurate particulars of income qua bogus purchases. The CIT(A) has deleted the penalty by placing reliance on the decisions of Tribunal and the judgments of Hon'ble Supreme Court of India. The ratio of said judgments do not apply to the facts of present case.

(A.Y.2010-11) ITA NO.5049/MUM/2019(A.Y.2011-12)

4.

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. The Assessing Officer made addition of entire alleged bogus purchases. In First Appeal, the CIT(A) restricted the addition to 12.5% of such purchases. The Assessing Officer levied penalty on the estimated addition confirmed by the CIT(A). It is an accepted legal position that no penalty under section 271(1)(c) of the Act can be levied on additions that have been made merely on the basis of estimations. 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 made addition of the entire alleged bogus purchases, the CIT(A) restricted the addition to 12.5% by estimating escaped profit embedded in alleged bogus purchases.

5. 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. The Tribunal in various decisions has repeatedly held that penalty under section 271(1)(c) of the Act levied on addition resulting from estimations is unsustainable. Thus, in the light of the facts of the case and the (A.Y.2010-11) ITA NO.5049/MUM/2019(A.Y.2011-12) decisions referred above, we find no infirmity in the impugned orders of CIT(A) for respective assessment year deleting penalty. Therefore, the same are upheld and both the appeals of the Revenue are dismissed sans merit.

5.

In the result, appeals by the Revenue are dismissed.

Order pronounced in the open court on Wednesday, the 17th day of February, 2021.

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