ACIT 12(2)(1), MUMBAI vs. M/S EHARA ENGINEERING PVT. LTD., MUMBAI

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-20, Mumbai (in short ‘the CIT (A)’) dated 14/03/2019 for the assessment year 2011-12 deleting penalty levied u/s 271(1)(c) of the Income Tax Act, 1961( herein after referred to as ‘the Act’)

Shri Amit Pratap Singh, representing the Department submitted that the Assessing Officer had made addition vide assessment order dated 28/07/2016 passed u/s.143(3) r.w.s. 147 of the Act on account of bogus purchases. The Assessing Officer made addition to the extent of 12.5% of the total bogus purchases. The Assessing Officer, thereafter, on the addition made initiated penalty proceedings u/s 271(1)(c) of the Act. The Assessing Officer vide order dated 30/01/2017 levied penalty of Rs.1,61,102/- u/s. 271(1)(c) of the Act. The CIT(A) deleted the penalty holding that no penalty can be levied on addition made on estimate basis. The ld. Departmental Representative vehemently defended the action of Assessing Officer in levying penalty and prayed for reversing the findings of CIT(A).

We have heard the submission made by ld. Departmental Representative and have examined the documents available on record. A perusal of the penalty order dated 30/01/2017 reveal that the addition in respect of bogus purchases was made on mere estimations. The CIT(A) has deleted the penalty by placing reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of Harigopal Singh vs. CIT reported as 258 ITR 85(P&H). It is a well settled legal position that no penalty can be levied on estimated additions. The Hon’ble High Court held that where the addition in the income were made on estimate basis that itself does not lead to the conclusion that the assessee either concealed the particulars of his income or furnished inaccurate particulars of such income. There has to be a positive act of concealment on the part of the assessee and onus to prove this is on the Department. Thus, where the addition is made merely on estimation, the provisions of section 271(1)(c) of the Act are not attracted. We do not find any infirmity in the order of CIT(A). The impugned order is upheld and the appeal of the Revenue is dismissed being devoid of any merit.

In the result, appeal of the Revenue is dismissed.