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Income Tax Appellate Tribunal, MUMBAI F BENCH, MUMBAI
Appearances by Samantha M for the appellant Jinendra Singh for the respondent Date of concluding the hearing: : October 28, 2020 Date of pronouncement : January 25, 2021 ORDER Per Pramod Kumar, VP: 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 30th January 2019 passed by the learned CIT(A), in the matter of penalty under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2011-12.
Grievance raised by the appellant, in the form of a question posed for our consideration, is as follows:
Whether on the facts and in the circumstances of the case and in law, was learned CIT(A) right in deleting the penalty of Rs 12,28,633 levied under section 271(1)(c) of the Income Tax Act, 1961?
To adjudicate on this grievance, only a few facts need to be referred to. In the course of the scrutiny assessment proceedings, the Assessing Officer made an addition of Rs Assessment year: 2011-12 Page 2 of 3 39,59,200 on account of bogus purchases, and of Rs 16,964 on account of disallowance of interest for funds used for purchase of land. It was for this reason that a penalty of Rs 12,28,630 under section 271(1)(c) was also imposed on the assessee for furnishing of inaccurate particulars and for concealment of income. Aggrieved, assessee carried the matter in appeal before the CIT(A). In the meantime, the quantum additions travelled in appeal before a coordinate bench of this Tribunal, and the addition of Rs 39,59,200 was restricted to Rs 4,94,900, being 12.5% profit element estimated to be embedded therein. Learned CIT(A) took note of this fact, and of various coordinate bench decisions holding that no penalty under section 271(1)(c) can be imposed in the cases of additions on estimated basis, as in this case. He thus deleted the impugned penalty of Rs 12,28,630. The Assessing Officer is aggrieved of the relief so granted by the CIT(A), and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We have noted that so far as the addition on account of bogus purchases is concerned, it stands reduced to Rs 4,94,900 anyway, and that too entirely on the estimated basis @ 12.5% being profits embedded in these bogus purchases. It is by now consistent stand of the coordinate benches that in the cases of such additions on estimated basis, penalty under section 271(1)(c) cannot be imposed. In the case of Chempure Vs ITO [(2010) 40 SOT 164 (Mum)], a coordinate bench, dealing with a materially identical addition in respect or bogus purchases wherein profit embedded therein was computed @25%, had come to the conclusion that no penalty under section 271(1)(c) can be imposed in such a case, and the view so taken by the coordinate bench has been consistently followed in a large number of cases. In the case of Earthmoving Equipment Service Corporation Vs DCIT [(2017) 84 taxmann.com 51 (Mum)], the same view was reiterated, and it was concluded as follows:
On merits, Ld. AR has assailed imposition of penalty on various grounds and placed reliance on various judicial pronouncements which we have duly considered. We find that first of all Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. Merely because the suppliers could not be traced at the given address would not automatically lead to a Assessment year: 2011-12 Page 3 of 3 conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. All the cited case laws support the view taken by us in the matter. Therefore, by deleting the impugned penalties, we allow assessee's appeal.
We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the consistent views of the coordinate benches, and bearing in mind the fact that the related quantum additions were purely on estimated basis with inherent subjectivity involved, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. No interference is called for in the well- reasoned and right conclusions arrived at by the learned CIT(A).