ASSISTANT COMMISSIONER OF INCOME TAX-3(2)(1), MUMBAI vs. M/S. LIPI DATA SYSTEM LTD, MUMBAI

“1 . Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty of Rs.80,5551- without appreciating that the assessee failed to establish the genuineness of the transaction with respect to its nature and source of investment and therefore the AO was correct in holding the transaction of the assessee with M/s Dev Enterprises as bogus transaction?

Whether on the facts and circumstances of the case and in law,, the order of the Ld. CIT (A) is not perverse in staling in para 3.1.8 of his order that penalty levied u/s 271(1) (c) of the Act, 1961 is not maintainable in view of CBDT Circular No 25/2015 (F. No. 279/Misc/140120151ITJ dated 31.12.2015 without appreciating that for the year under consideration the income tax payable on total income was computed under normal provisions of the Act and not on Book profit u/s 115 JB of the Act?

The Brief facts of the case are that, the assessee company is engaged in the business of manufacturing of printers, ATM Machines and cartridge etc. The assessee has filed the return of income on 12.09.2011 declaring total income at Rs. 8,62,21,670/-and Book profit u/s M/s Lipi Data System Ltd. 115JB of Rs. 12,41,01,207/-. Subsequently, notice u/s 143 (2) and 142 (1) of the Act along with questionnaire were issued. In compliance the Ld. AR of the assessee appeared from time to time and furnished the details. The A.O. found that the assessee has obtained bogus purchases bills from the operators as per the information received from Sales Tax Department. The assessee was also served with the show cause notice, and the explanations were filed refereed at para 5.2 of the order. Whereas, the AO was not satisfied with the explanations and observe that the assessee could not prove the genuineness of the purchases, hence made an addition of Rs 1,21,25,460/- of bogus purchases and disallowance u/s 14A of the Act Rs 1,00,186/- and assessed the total income ofRs.9,84,47,320/and passed the order u/s 143 (3) of the Act dated 26.03.2013.

Subsequently, the A.O. initiated penalty proceedings u/s 271 (1) (c) of the Act. In response to the notice, the assessee has explained that against the 100% addition of bogus purchases. On appeal by the assessee, the Ld. CIT(A) has restricted the addition @ 25% of Bogus Purchases. Further, on the appeal by the revenue as well as the assessee, the Hon’ble ITAT in the case of the M/s Lipi Data System Ltd. revenue appeal has directed the AO to restrict the addition by estimating further Gross Profit of 2% of bogus purchases. The assessee has filed explanations in the penalty proceedings, whereas the AO was not satisfied with the submissions and levied penalty of Rs.80,555/- and passed the order u/s 271 (1) (c) of the Act. Aggrieved by the order, the assessee has filed an appeal with the CIT (A). The Ld. CIT (A) considering the facts and submissions of the assessee dealt on the dispute issue and relied on the judicial decisions and observed that the penalty is not sustainable on adhoc disallowances were the income is estimated and deleted the penalty and allowed the appeal of the assessee.

Aggrieved by the CIT(A) order, the revenue has filed the appeal before the Hon’ble Tribunal. At the time of hearing, Ld. DR submitted that the CIT(A) erred in deleting the penalty. We find the Ld.CIT (A) relied on the judicial decisions and observed at para 3.1.8 and 3.1.9 of the order, which is read as under:- 3.1.8 It is also found that the Board itself vide circular F No279/Misc/140/2015/ITJ dated 31/12/2015 has directed that M/s Lipi Data System Ltd. for a period prior to 01/04/16, no penalty is leviable with reference to the additions and disallowances made under normal provisions, where the Income Tax payable on the normal income is less than the book profits u/s 1 15JB. The same has been upheld as such by the Hon'ble Delhi High Court as well in the case of Nalwa Sons Investment Ltd. Thus , on these premises also, the penalty is not maintainable. 3.1.9 Concludingly, the tenets for determining concealment or furnishing of inaccurate particulars have been laid out in the above judgments. The principles laid down in the above mentioned judgments of the Apex Court and jurisdictional courts and the facts and circumstances of the instant case do not merit imposition of penalty u/s 271(1)(c) at all. Penalty levied u/s. 271(1)(c) of the Income Tax Act, 1961 of Rs. 80.555/- for alleged furnishing of inaccurate particulars is, therefore, deleted.