ITO 26(1)(5), MUMBAI, MUMBAI vs. SHRI ISRAR AHMED J B CHOUDHARY, MUMBAI

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ITA 7119/MUM/2018Status: DisposedITAT Mumbai09 September 2020AY 2011-123 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 penalty cannot be levied on an addition made on an estimated basis. Therefore, the levy of penalty was cancelled. The Revenue's appeal was dismissed as the CIT(A) had already directed a reduction in penalty.

What were the facts?

The Assessing Officer (AO) made an addition for bogus purchases and levied penalty under Section 271(1)(c). The Commissioner of Income Tax (Appeals) reduced the addition amount but confirmed the penalty, directing the AO to recompute it. The Revenue appealed this reduction.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on an addition made on an estimated basis for bogus purchases.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI M.BALAGANESH, AM & SHRI PAVAN KUMAR GADALE, JM Shri

For Respondent: Shri Amit Pratap Singh
Hearing: 09/09/2020

आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-38, Mumbai in appeal No.CIT(A)-38/ITO-26(1)(5)/IT-206/2016-17, dated 21/06/2017 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961.

Shri Israr Ahmed J B Choudhary

2.

The only effective issue involved in this appeal is as to whether the ld. CIT(A) was justified in reducing the amount of penalty levied u/s 271(1)(c ) of the Act for disallowance made on account of bogus purchases.

3.

None appeared on behalf of the assessee. We have heard the ld. DR and perused the materials available on record. We find that the assessment was completed u/s.143(1) of the Act wherein the addition was made on account of bogus purchases in the sum of Rs.3,90,021/-. Penalty proceedings u/s.271(1)(c) of the Act were initiated for the same and penalty was levied for Rs.1,42,000/- by the ld. AO. We find that the addition made on account of bogus purchases was made on estimated basis.

1.

3.1. The ld. CIT(A) in its order has concluded that the assessee has failed to prove that the explanation put forth is bonafide and submissions and contentions of the assessee are not found to be acceptable and therefore, they are rejected and the penalty imposed by the AO is confirmed. However, in view of the fact that the addition made to total income on account of disallowance of expenses being bogus purchase has been reduced to Rs.3,90,201 as against the amount of Rs.5,87,652/- added by the AO and directed the AO to compute the amount of penalty leviable. By this process, only the quantum of penalty was directed to be reduced by the ld. CIT(A).

3.2. We find that ultimately, the penalty has been levied on the disallowance made on account of bogus purchases which was done on an estimated basis. It is trite law that no penalty would survive on an addition / disallowance made on an estimated basis. Hence, we do not Shri Israr Ahmed J B Choudhary have any hesitation in cancelling the levy of penalty in the instant case. We also find that the revenue cannot have any grievance on the order passed by the ld. CIT(A) in as much as the ld. CIT(A) had only directed the ld. AO to reduce the quantum of penalty due to reduction in the addition amount. Accordingly, the ground raised by the revenue is dismissed.

4.

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

Order pronounced in open court on 09/09/2020.

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