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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the revenue. The relevant assessment year is 2011-12. The appeal is directed against the order passed by the Commissioner of Income Tax (Appeals)-16, Mumbai [in short CIT(A)] and arises out of the penalty order u/s. 271 (1)(c) of the Income Tax Act, 1961 (the Act).
The grievance of the revenue is the deletion of penalty of Rs. 19,650/- by the Ld. CIT(A).
Briefly stated the facts of the case are that the assessee filed its return income for the AY 2011-12 on 30.09.2011 declaring total income of Rs. 66,30,766/-. On the basis of information received from the Sales Tax M/s. Arco Electro Technologies P. Ltd Department, Govt of Maharashtra that the assessee has obtained bogus purchase bills of Rs. 2,44,755/- for accommodation entries, the AO estimated the profit embedded in it at the rate of 25.98% (the net profit ratio being 25.98%) and made an addition of Rs. 63,587/-. Subsequently, the AO levied the minimum penalty of Rs. 19,650/- on the above income of Rs. 66,587/- being tax sought to be evaded u/s. 271 (1)(c) of the Act.
Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 15.02.2019, the Ld. CIT(A) deleted the above penalty of the ground that the said penalty was levied on income estimated on ad-hoc basis and the concealment of income or furnishing of inaccurate particulars of said income has not been established by the AO. In this context, reliance is placed by him on the order of the Tribunal in Earthmoving Equipment Service Corporation v. Dy. CIT, 22(2), Mumbai [2017] 84 taxmann.com 51 (Mumbai-trib.) and M/s. Chempure vs. ITO (ITA No’s 451, 452 &453/Mum/2006).
Before us, the Ld. Departmental Representative (DR) supports the order passed by the AO. Though the case was fixed for hearing on 08.09.2020, neither the assessee nor its authorised representative appeared before the Tribunal in virtual hearing on the above date. As there is non-compliance by the assessee, we proceed to dispose off this appeal on the basis of documents available on record and after hearing the Ld. DR.
We have heard the Ld. DR and perused the relevant materials on record. In the instant case, as mentioned earlier, the AO has made an 2 M/s. Arco Electro Technologies P. Ltd Rs. 63,587/- by estimating profit @ rate of 25.98% on disputed purchases of Rs. 2,44,755/-. We agree with the following conclusion of the Ld. CIT(A):
4.1.2. I find strength in the arguments of the Ld. AR. It is seen that the foundation for the addition of 25.98% of the bogus purchases made in the assessment order is the inference drawn by the AO that the assessee has made the real purchases from the grey market without bills and obtained the bills from hawala suppliers at a higher price. It is seen that this factual inference has been made by the AO on the basis of the surrounding circumstances only and there was no positive evidence to show that the appellant did not make purchases from the said hawala suppliers from whom the bills were obtained and had instead made the purchases from grey market. Though, it was stated that the concerned hawala operators had made a statement on oath before the sales tax authorities, the contents of the said statements have not been brought on record to show that all the sale bills issued by the said parties are bogus including the sale bills issued to the appellant. Further, it is seen that the addition made on account of bogus purchases was estimated at 25.98% of the alleged bogus purchase bills and there was no evidence regarding the actual benefit derived by the appellant by obtaining bogus bills. 4.1.3. Penalty u/s 271(l)(c) was levied on income estimated on an adhoc basis. Concealment of income or furnishing of inaccurate particulars has not been established by the Assessing Officer. Therefore, penalty u/s 271(l)(c) cannot be levied. 5.1 As mentioned earlier, the penalty has been levied by the AO on estimated profit. Considering the facts of the case and the order of the Tribunal in Earthmoving Equipment Service Corporation and M/s. Chempure mentioned hereinabove, we agree with the order of the Ld. CIT(A).
In the result, the appeal filed by the Revenue is dismissed.