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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: SHRI RAJESH KUMAR (AM) & SHRI RAM LAL NEGI (JM)
O R D E R PER RAM LAL NEGI, JM These appeals have been filed by the revenue against the two orders dated 10.01.2019 passed by the Commissioner of Income Tax (Appeals)-1 (for short ‘the CIT(A), Thane, for the assessment years 2009-10 and 2010-11 respectively, whereby the Ld. CIT(A) has allowed the appeals filed by the assessee against the penalty orders passed u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ‘Act’). Since both the appeals pertain to the same assessee 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 Assessment Year: 2009-10 & 2010-11 being disposed of by this common and consolidated order for the sake of convenience. Brief facts of the case are that the assessee engaged in the business of manufacturing pharmaceuticals machinery, equipment, parts, engineering goods and sheet metal fabrication, filed its return of income for the assessment year under consideration declaring total income of Rs. 3,95,720/-.The return was processed u/s 143 (1) of the Act. Subsequently, on the basis of information received from the Sales Tax Deptt. Govt. of Maharashtra, that the assessee had obtained bogus purchase bills from ‘hawala’ dealers, AO reopened the assessment after issuing notice u/s 148 of the Act. Accordingly, the AO passed assessment order u/s 143 (3) r.w.s. 147 of the Act determining the total income of the assessee at Rs. 5,26,740/- after making addition of Rs. 20.35% of the total amount of bogus purchases on estimate basis. Accordingly, AO initiated proceedings u/s 271 (1) (c) of the Act and levied penalty of Rs. 29,745/- for furnishing inaccurate particulars of income. The assessee challenged the penalty order before the Ld. CIT (A). The Ld. CIT (A) allowed the appeal of the assessee and deleted the penalty levied by the AO. The revenue is in appeal before this Tribunal against the said order.
2. The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- 1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the penalty levied u/s 271 (1) (c) without properly appreciating the decisions of the Hon’ble Apex Court in the case of Mak Data Pvt. Ltd. Vs CIT (Civil Appeal No. 9772 of 2013)”, the Hon’ble Gujarat High Court’s decision in the case of N.K. Proteins Ltd, Tax Appeal No. 242 of 2003 dated 20/06/2016 against which the SLP was dismissed by the Hon’ble Supreme Court and also ignoring the fact that Department received specific credible information in this case from the Sales Tax Department of the State Assessment Year: 2009-10 & 2010-11 Government of Maharashtra” in respect of non-genuine purchases. 2. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the penalty levied u/s 271 (1) (c) without appreciating the fact that there was a definite finding in the assessment order in respect of bogus purchases and of furnishing inaccurate particulars of income relating to purchases resulting into concealment of income.
3. It is humbly requested that present appeal is being filed in accordance with the CBDT’s Instruction No. 3/2018 dated 11/07/2018 amended vide letter dated 20.08.2018 as per para 10(e) of the said circular. Therefore, the order of the CIT (A) may kindly be vacated and that of the AO may be restored.”
These appeals were fixed for hearing on 23.11.2020. However, when the cases were called out for hearing, none appeared on behalf of the assessee. Hence, we decided to dispose of these appeals on the basis of material on record after hearing the Ld. Departmental Representative (DR). Accordingly, we asked the Ld. DR to present the case of the department.
The Ld. DR submitted before us that the Ld. CIT (A) has wrongly deleted the penalty levied u/s 271 (1) (c) of the Act without appreciating the law laid down by the Hon’ble Apex Court in the case of Mak data Pvt. Ltd. vs. CIT (Civil Appeal No. 9772 of 2013, the Hon’ble Gujarat High Court in the case of N.K. Proteins Ltd., Tax Appeal No. 242 of 2003 dated 20.06.2016 against which the SLP filed has been dismissed by the Hon’ble Supreme Court. The Ld. DR further submitted that since the assessee failed to establish the genuineness of the transaction, the AO had rightly levied penalty u/s 271 (1) (c) of the Act. Hence, the impugned order is liable to be set aside.
We have perused the material on record in the light of the submissions made by the Ld. DR. We notice that the AO has made addition of 20.35% of the total amount of bogus purchases made by the assessee estimating the profit from the said transaction. In the case of Sh. Ajay Loknath Lohia vs. ITO (supra), the coordinate Bench of the Tribunal has deleted the penalty levied Assessment Year: 2009-10 & 2010-11 u/s 271(1)(c) of the Act, on the basis of addition sustained on estimation basis. The relevant para of the order read as under:
8. Having heard both the sides, we find merit in the arguments of the assessee for the reason that although the AO has estimated 25% gross profit on alleged bogus purchases, never made by observations with regard to the incorrectness in details filed by the assessee to prove such purchases. The AO never disbelieved information filed by the assessee, but he proceeded on the basis of information received from sales-tax department to make additions. The AO has made such addition on adhoc basis by estimating gross profit on alleged bogus purchases. From these facts, it is very clear that the AO failed to make a case of deliberate attempt by the assessee to furnish inaccurate particulars of income. Therefore, we are of the considered view that mere disallowance of purchases on adhoc basis does not tantamount to willful furnishing inaccurate particulars of income within the meaning of section 271 (1) (c) of the Income Tax Act, 1961. Hence, we are of the considered view that the AO was erred in levying penalty u/s 271 (1) (c) of the Act. Accordingly we direct the AO to delete the penalty levied u/s 271 (1) (c) of the Act.
In the present case, the AO has levied penalty u/s 271 (1) (c) of the Act on the addition made on account of bogus purchases on estimation basis. The coordinate Bench has decided the identical issue in case of Sh. Ajay Loknath Lohia vs. ITO and Sameer D. Punjabi, ETCO Telecom Ltd. and other cases (supra), in favour of the assessee. Since the facts of the present case are similar and the issue involved are identical, we do not find any reason to take a different view in this case. In our considered view, the findings of the Ld. CIT (A) are in accordance with the decision of the coordinate Bench discussed above. The cases relied upon by the Ld. DR are distinguishable on facts. Hence, respectfully following the decision of the coordinate Bench aforesaid, we uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the revenue. Accordingly, we direct the AO to delete the penalty levied/s 271(1)(c) of the Act. Assessment Year: 2009-10 & 2010-11 The facts of the present case are similar to the facts of the revenue’s appeal for the assessment year 2009-10 except the amount of addition and penalty levied thereon.
The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- 1. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the penalty levied u/s 271 (1) (c) without properly appreciating the decisions of the Hon’ble Apex Court in the case of Mak Data Pvt. Ltd. Vs CIT (Civil Appeal No. 9772 of 2013)”, the Hon’ble Gujarat High Court’s decision in the case of N.K. Proteins Ltd, Tax Appeal No. 242 of 2003 dated 20/06/2016 against which the SLP was dismissed by the Hon’ble Supreme Court and also ignoring the fact that Department received specific credible information in this case from the Sales Tax Department of the State Government of Maharashtra” in respect of non-genuine purchases. 2. “Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the penalty levied u/s 271 (1) (c) without appreciating the fact that there was a definite finding in the assessment order in respect of bogus purchases and of furnishing inaccurate particulars of income relating to purchases resulting into concealment of income.
3. It is humbly requested that present appeal is being filed in accordance with the CBDT’s Instruction No. 3/2018 dated 11/07/2018 amended vide letter dated 20.08.2018 as per para 10(e) of the said circular. Therefore, the order of the CIT (A) may kindly be vacated and that of the AO may be restored.”