DCIT 9(3(2), MUMBAI vs. G.L. CONSTRUCTIONS P.LTD, MUMBAI

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ITA 1357/MUM/2019Status: DisposedITAT Mumbai25 June 2020AY 2010-115 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 additions made on an estimation basis, as in this case where the addition was restricted to 2% of bogus purchases, do not amount to concealment of income or furnishing of inaccurate particulars. Therefore, penalty under Section 271(1)(c) is not sustainable.

What were the facts?

The assessee obtained bogus purchase bills amounting to Rs. 5,03,85,966. The Assessing Officer (AO) made an addition to the total income, and subsequently initiated penalty proceedings under Section 271(1)(c). The Commissioner of Income Tax (Appeals) restricted the addition to 2% of the bogus purchases and deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the addition to income is based on estimation and not on proven concealment or furnishing of inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147,Section 148,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI

Before: SHRI RAJESH KUMAR (AM) & SHRI RAM LAL NEGI (JM)

For Appellant: Shri N.R. Agarwal
For Respondent: Shri Rahul Raman (CIT DR), Shri N.R. Agarwal
Hearing: 24/06/2020Pronounced: 25/06/2020

O R D E R PER BENCH The Revenue has filed these appeals against the two orders dated 28.12.2018 passed by the learned Commissioner of Income Tax (Appeals)-16 (for short ‘the CIT (A)’), Mumbai, for the assessment year 2009-10 & 2010- 11, whereby the Ld. CIT (A) has allowed the appeals filed by the assessee against the penalty orders passed by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (for short the ‘Act’).

2.

Since both the appeals pertain to the same assessee company for assessment years 2009-10 & 2010-11 and the issues involved in both the cases are identical, these cases were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience.

3.

In this case, the assessee filed its return of income for the assessment year under consideration declaring the total income of Rs.3,73,64,826/-. The return was processed and assessment order u/s 143(3) was passed M/s. G.L. Constructions Pvt. Ltd. determining the total income at Rs.3,18,38,780/-. Subsequently, on the basis of information received from the Sales Tax authorities, Maharashtra to the effect that the assessee had obtained bogus/accommodation bills from various entities, which used to issue accommodation bills on commission basis without supplying any goods to various assessees. Accordingly, the case was reopened u/s 147 of the Act after issuing notice u/s 148. After hearing the assessee AO held that during the year relevant to the assessment year under consideration the assessee had obtained bogus bills from different companies amounting to Rs.5,03,85,966/-. Hence, he made addition of the said amount to the total income of the assessee and determined the total income at Rs. 8,22,24,750/-. In the first appeal, the Ld. CIT(A) restricted the addition to 2% of the total amount of bogus purchase determined by AO. The revenue challenged the order passed by the Ld. CIT(A) before the ITAT. The Tribunal after hearing both the sides confirmed the findings of the Ld. CIT(A) 4. On the basis of the addition aforesaid, the AO initiated penalty proceedings against the assessee u/s 271(1)(c) of the Act for concealing its income by furnishing inaccurate particulars of income. The assessee challenged the penalty order before the Ld. CIT(A). The Ld. CIT(A) after hearing the assessee allowed its appeal and directed the AO to delete the penalty levied u/s 271(1)(c) of the Act. The Revenue is in appeal against the said findings of the Ld. CIT(A).

5.

The Revenue has challenged the impugned order passed by the Ld. CIT(A) on the following ground: “

1.

Whether on the facts and circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty levied by the AO u/s 271(1)(c) of the Income Tax Act thereby the provisions of section 271(1)(c)”.

6. Before us, the Ld. Departmental Representative (DR) submitted that the Ld. CIT(A) has wrongly deleted the penalty levied by the AO u/s 271(1)(c) of the Act ignoring the fact that the ITAT has sustained the addition to the extent of 2% of the bogus purchases made by the assessee during the previous year. The Ld. DR further submitted that the findings of the Ld. CIT(A) are contrary to the settled principles of law as once it is proved that M/s. G.L. Constructions Pvt. Ltd. the assessee has concealed its income or furnished inaccurate particulars of its income, it becomes liable for penalty u/s 271(1)(c) of the Act. The Ld. DR accordingly submitted that the impugned order passed by the Ld. CIT(A) may be set aside and the order passed by the AO may be restored.

7. On the other hand, the Ld. counsel for the assessee submitted that the Ld. CIT(A) has decided the issue in question in accordance with the decisions of the jurisdictional Benches of the Tribunal. The Ld. counsel further pointed out that the Ld. CIT(A) has decided this issue in favor of the assessee by following the decision of the ITAT Mumbai in the case of Sameer D. Punjabi, and ETCO Telecom Ltd. vs. ITO, ITA No. 5243/M/2012. Since the issue involved in the present appeal is covered in favour of the assessee by the decisions of the Tribunal, there is no merit in the Revenue’s appeal.

8. We have heard the rival submissions of the parties and perused the material on record in the light of the rival contentions. We notice that the Ld. CIT(A) has decided the issue in question by following the decisions of the coordinate Bench in the case of Sameer D. Punjabi and ETCO Telecom Ltd. (supra). As pointed out by the Ld. counsel, the sole ground of the Revenue’s appeal is covered in favour of the assessee by the decisions of the coordinate Bench referred above. In the case of Sameer D. Punjabi and ETCO Telecom Ltd., the coordinate Bench has categorically held that the addition made on estimation basis does not amount to concealment of income or furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act. The findings of the coordinate Bench in the case of Sameer D. Punjabi and ETCO Telecom Ltd. (supra) read as under :-

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