ACIT-9(2)(2), MUMBAI vs. CONDOT SYSTEMS PVT. LTD., MUMBAI

PDF · subscribers
ITA 824/MUM/2019Status: DisposedITAT Mumbai17 November 2020AY 2010-116 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 when an addition to income is sustained on an estimation or ad-hoc basis, no penalty under Section 271(1)(c) can be levied. Therefore, the deletion of penalty by the CIT(A) was justified.

What were the facts?

The assessee company was involved in bogus purchases, leading to an addition to its income by the Assessing Officer (AO). The AO also initiated penalty proceedings under Section 271(1)(c). The Commissioner of Income Tax (Appeals) deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when income addition is based on estimation due to unverifiable purchases.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 145(3),Section 148,Section 143(2),Section 142(1),Section 133(6),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI PRAMOD KUMAR & SHRI PAVAN KUMAR GADALE

Pronounced: 17/11/2020

PER PAVAN KUMAR GADALE - JM:

1.

The revenue has filed an appeal against the order of the Commissioner of Income Tax (Appeals)-16 Mumbai passed u/sec 271 (1)(c) and 250 of the Act. The sole ground of appeal raised by the revenue that the Ld CIT(A) has erred in law deleting the penalty levied u/sec 271 (1)(c) of the Act by the assessing officer.

Condot Systems, Mumbai. - 2 - 2. The Brief facts of the case are, the assessee company is engaged in manufacturing of contact coder and Ink jet printers and filed the return of income for the A.Y 2010-11 on 06.09.2010 disclosing total income of Rs. 78, 99,770/-.Subsequently, notice u/s 148 of the Act was issued by the assessing officer, as the assessee was involved in obtaining the bogus purchase bills from operators as per the information received from Maharashtra Sales Tax Department. Further, the A.O has issued notice u/s 143(2) and 142(1) of the Act. In response to the notice the LdAR of the assessee appeared from time to time and filed the details. In the assessment proceedings to conduct enquires, the AO has called for the information u/s 133(6) of the Act on the parties to verify the purchase transactions. The A.O was not satisfied with the information submitted in respect of the transactions referred at para 8 of the assessment order and rejected the books of accounts u/sec145(3) of the Act. The A.O. relied on the judicial decisions and estimated the income @ 12.5% of the unverifiable purchases and assessed the total income of Rs. 1,02,64,900/- and passed the order u/s 143(3) r.w.s

Condot Systems, Mumbai. - 3 - 147 of the Act dated 17.03.2016. Subsequently, the A.O initiated penalty proceedings u/s 271(1)(c) of the Act and called for explanations. The assessee has filed the details and explained that the assessee has accepted the addition of 12.5% of estimated income of bogus purchases bills. But the AO has overlooked the facts and is of the opinion that the assessee has concealed the particulars of income and levied the penalty of Rs. 7,30,832/- and passed the order u/s 271(1)(c) dated 27.09.2016.

3.

Aggrieved by the penalty order, the assessee has filed an appeal with the CIT(A). Whereas, the CIT(A) considered the grounds of appeal and the submissions of the assessee, that the addition made in respect of alleged bogus purchases were accepted by the assessee to buy peace with the revenue. Further the Ld. CIT(A) considered the factual aspects and the decisions of the Coordinate Bench of the Hon’ble Tribunal referred at para 4.1.1 to 4.1.8 of the order and held that the penalty levied under 271(1)(c) of the Act is not justified and directed the Assessing to delete the penalty and allowed the appeal.

Condot Systems, Mumbai. - 4 - Aggrieved by the order of the CIT(A), the revenue has filed an appeal with the Tribunal.

4.

At the time of hearing none appeared on behalf of the assessee. The Ld. DR submitted that the LdCIT(A) has erred in deleting the penalty, ignoring the facts that the assessee has ventured into transactions of bogus purchases and has concealed the income.

5.

We heard the Ld. DR and perused the material on record. We find the sole crux of the disputed issue that, the revenue is aggrieved with the order of the CIT(A),who has deleted the penalty irrespective of the transactions of the assessee in obtaining the bogus bills from the operators as disclosed, in the web site of Maharashtra Sales Tax Department. We find the assessee in the assessment proceedings has submitted the details and the AO has called for the information u/s 133(6) of the Act from the parties to verify the purchase transactions. The A.O considered the facts and the documents submitted in the assessment proceedings and finally rejected the Books of Accounts u/Sec145(3) of the Act and estimated the income @ 12.5% of the bogus purchases and passed

Condot Systems, Mumbai. - 5 - the assessment order. Subsequently, penalty was levied u/s 271(1)(c) of the Act by the A.O. The assessee has preferred an appeal against penalty order with the CIT(A). In the course of the appellate proceedings before the CIT(A),it was submitted that the assessee has not contested the quantum addition being estimation of income @12.5% of unverifiable purchases to buy peace with the Income tax department and has accepted the addition and the penalty cannot be levied, when income is estimated by the assessing officer. We are of the opinion that, when the addition is sustained on estimation/ adhoc basis, no penalty u/s 271(1)(c) of the Act can be levied. We find that the LdCIT(A) relied on the Coordinate Bench of Hon’ble tribunal decisions and passed a reasoned order in directing the Assessing Officer to delete the penalty. Accordingly, we are not inclined to interfere with the order of the Ld CIT(A) and upheld the same and dismissed the grounds of appeal of the revenue.

6.

In the result, the appeal filed by the revenue is dismissed.

Condot Systems, Mumbai. - 6 - Order pronounced in the open court on 17.11.2020

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →