DCIT, CIRCLE-2, THANE vs. PRAKASH HANSRAJ PATEL, THANE

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ITA 1268/MUM/2019Status: DisposedITAT Mumbai11 March 2020AY 2013-144 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 upheld the deletion of penalty, agreeing with the CIT(A) that the mere disallowance of purchases does not automatically imply concealment of income or mala fide intention. Judicial pronouncements support that not appealing an addition does not equate to admission of concealed income.

What were the facts?

The Assessing Officer (AO) levied a penalty under Section 271(1)(c) for additions made on account of bogus purchases. The assessee did not appeal the quantum addition, but the CIT(A) deleted the penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied solely on the basis of disallowance of purchases without a finding of concealment of income or mala fide intention.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “SMC”, BENCH

For Respondent: Shri Mohammad Rizwan (Addl.CIT)
Hearing: 04/03/2020Pronounced: 11/03/2020

आदेश / O R D E R PER: R.C. SHARMA, A.M. This is the appeal filed by the revenue against the order of the ld. CIT(A)-1, Thane dated 03/12/2018 for the A.Y. 2013-14 in the matter of deletion of penalty imposed U/s 271(1)(c) of the Income Tax Act, 1961 (in short, the Act) amounting to Rs.80,627/-.

2.

We have gone through the orders of the authorities below and found that the A.O. has levied penalty of Rs. 80,627/- with respect to addition made on account of bogus purchases by estimating profit thereon. By the impugned order, the ld. CIT(A) has deleted the penalty after observing as under:

1.

DCIT Vs Shri Prakash Hansraj Patel “DECISION on ground No. 1:- 5. I have carefully considered the facts of the case, findings of the AO, submission of the AR of the appellant and material placed on record. It is observed that there is a normal tendency to subject an assessee to penalty u/s 271(1)(c) in all cases where the assessee refrains to file an appeal pursuant to an assessment order, with a hope to end the nightmare which began with selection of case for scrutiny by accepting the general additions in assessment order. Penalty is straightaway levied merely because no appeal has been filed against the quantum order. The Hon'ble Supreme Court in the case of Sir Shadilal Sugar Mills (168 ITR 7051) held that there may be a hundred and one reasons for not protesting and agreeing to an addition but that does not follow to the conclusion that the amount agreed to be added was concealed income. The Hon'ble Karnataka High Court in case of CIT v. Manjunatha Cotton & Ginning Factory (2013 35 taxmann.com 250) categorically held that:-

The very fact that the assessee agreed to pay tax and did not challenge the assessment order, cannot be construed as mala fide."

6.

The Supreme Court has recently reiterated the law in case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 by holding in para 62 that finding in assessment proceedings cannot automatically adopted in penalty proceedings and the authorities have to consider the matter afresh from different angle. In the case of CIT v. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC) it was held as under –

We do not agree; as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the DCIT Vs Shri Prakash Hansraj Patel expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature".

7.

The levy of penalty is merely on disallowance of purchases and not finding of concealment of any particular or mala-fide intention to reduce taxable income. Addition made on account of disallowance of purchases as bogus automatically cannot justify the penalty levied u/s 271(1)(c) of the Act. Accordingly, the penalty of Rs. 80,627/-, imposed u/s 271(1)(c) of the I.T. Act, by the AO, is hereby deleted and the grounds of appeal

, raised as above, are allowed.”

3. Against the above order of the ld. CIT(A), the revenue is in further appeal before the ITAT.

4. We have considered the contentions of ld. DR and found that it is clear from the orders of the lower authorities that the penalty has been levied for disallowance of meager amount of purchases alleged to be bogus. Since the addition was very meager, the assessee did not file appeal against the same. However, the A.O. also levied penalty for the alleged bogus purchases which was deleted by the ld. CIT(A) after considering various judicial pronouncements. The detailed finding so recorded by the ld. CIT(A) at para 5 to 7 of his appellate order has not been controverted by the ld DR. Accordingly, we do not find any DCIT Vs Shri Prakash Hansraj Patel reason to interfere in the order of the ld. CIT(A) for deleting the penalty imposed for disallowance of part of the purchases.

5.

In the result, appeal of the revenue is dismissed.

Order pronounced in the open court on 11th March, 2020.

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