ITO WARD 1 (5), THANE vs. M/S DUROSHARP KNIVES, THANE

In the appellate proceedings, the Ld. CIT(A) deleted the penalty by relying on the decision of Hon'ble Apex Court in the case of Sir Shadilal Sugar Mills 168 ITR 7051 wherein it has been held that the mere non protesting and agreeing to the addition does not lead to the conclusion that amount agreed is 3 M/s. Durosharp Knives to be added as considered income. The Ld. CIT(A) also relied on the decision of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory 2013 35 taxmann.com 250 wherein it has been held that the mere fact that assessee has agreed to pay the tax and did not challenge the assessment order can not be construed as malafide. The Ld. CIT(A) further relied on the decision of the Dilip N. Shroff v. Jt. CIT (2007) 291 ITR 519 by holding that assessment proceedings can not be automatically adopted in penalty proceedings and authorities have to consider the matter from different angle. The Ld. CIT(A) finally relied on the decision of Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products Ltd. 2010 322 ITR 158 SC wherein it has been held that where the assessee has furnished all the details of expenditure as well as income in return of income which details in themselves were not found to be inaccurate or nor could be viewed as concealment of income on its part, then it is up to the authorities to accept its claim in the return or not. Merely because the assessee has claimed expenditure which was not accepted or was not acceptable to the Revenue by itself would not attract the penalty under section 271(1)(c) of the Act. The aggrieved by the order of ld CIT(A) the revenue is in appeal before us.

After hearing the Ld. D.R. and on going through the material on record, we note that in this case the addition was made towards alleged bogus purchases at the rate of 25% of alleged bogus purchases of Rs.1,16,795 resulting into an addition of Rs.29,200/- . The assessee has not preferred any appeal against the quantum proceedings. Thereafter ,the AO levied the penalty for inaccurate particulars of income of 4 M/s. Durosharp Knives Rs.9,020/- at 100% of the taxes sought to be evaded. We have carefully perused the order of Ld. CIT(A), who, after relying on various decisions of Hon’ble Apex Court and various other judicial forums, has deleted the penalty by holding that non protesting the quantum addition would not automatically lead to the conclusion that assessee has filed inaccurate particulars of income or concealed its income. Similarly, Ld. CIT(A) has also opined that no penalty is leviable in case of estimation of income by the AO. In the present case the assessee has fully disclosed all the details of purchases in its accounts and in return of income and the AO has estimated addition equal to 25% of the total purchases and added the same to the total income of the assessee. In our opinion, the order of Ld. CIT(A) is very reasoned order passed after taking into account the ratio laid down by the various judicial forums on this issue including the decision of CIT Vs Reliance Petro Products P Ltd (supra). Accordingly, we uphold the order of ld CIT(A) on the ground that no penalty is leviable in case of estimation of income by dismissing the appeal of the revenue .

Accordingly, appeal of the Revenue is dismissed.