ACIT, CIRCLE-9(3)(1), MUMBAI vs. FILTERATION ENGINEERS INDIA PVT LTD, MUMNBAI

This appeal by revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-16, [CIT(A)], Mumbai dated 24.12.2018 for Assessment Year 2011-12. The revenue has raised the following grounds of appeal: i. “Whether on the facts and in the circumstances of the case and in law, was Ld. CIT(A) right in deleting the penalty levied by the Assessing Officer u/s. 271(1)(c) of the Income Tax Act, 1961?” ii. The appellant prays that the order of the ld. CIT(A) on the above ground be set aside and that of the AO be restored.

The Assessing Officer while passing the assessment order initiated the penalty under section 271(1)(c) of the Act. The show-cause notice under section 271(1)(c) r.w.s 274 dated 16.05.2017 was served upon the assessee. In response to the show-cause, the assessee filed reply dated 22.05.2017. In the reply, the assessee contended that the purchases made by assessee were genuine. It was stated that the assessee made the payment through Account Payee cheques, all the evidence pertaining to the purchase bills, delivery challans and copy of ledger accounts were furnished. It was also stated that due to long gap, the assessee could not produce the vendors and aggregate for disallowance @ 12.5% out of the total purchases. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded on disallowance of Rs. 14,04,388/-. The Assessing Officer computed the penalty of Rs. 4,66,502/- in its order dated 31.05.2017 passed under section 271(1)(c). Mum 2019-M/s Filteration Engineers India Pvt. Ltd.

On appeal before the ld. CIT(A), the entire penalty was deleted. The ld. CIT(A) while deleting the penalty followed the decision of Tribunal in M/s Chempure vs. ITO (40 SOT 164), Earthmoving Equipment Service Corporation vs. Dy.CIT [2017] 84 taxmann.com 51 (Mumbai Trib.).

None appeared on behalf of assessee; the notice sent through registered post with acknowledgement due (RPAD) returned back un-served with the remark of postal authority “Left”. Thus, we left no option except to hear the submission of ld. Departmental Representative (DR) for the revenue and decide the appeal on the basis of submission of ld. DR and the material available on record. The ld. DR for the revenue supported the order of Assessing Officer. The ld. DR for the revenue submits that the assessee accepted the addition and no further appeal was filed before the First Appellate Authority in quantum assessment. The assessee furnished inaccurate particulars of income and could not substantiate the genuineness of purchases.

We have considered the submission of ld. DR and perused the order of lower authorities. There is no dispute that while passing the assessment order dated 17.03.2011 under section 143(3) r.w.s.

The Assessing Officer made the disallowance on estimated basis. The Assessing Officer disallowed 12.5% of aggregate of total alleged bogus purchases. The 3 Mum 2019-M/s Filteration Engineers India Pvt. Ltd.

We have noted that the ld. CIT(A) while passing the impugned order has followed the order of Tribunal in M/s Chempure vs. ITO (supra) & Earthmoving Equipment Service Corporation vs. Dy.CIT (supra). In our view, it is now settled position under the law that no penalty under section 271(1)(c) is leviable on adhoc addition. Therefore, we affirmed the order passed by ld. CIT(A). No contrary facts or law is brought to our notice to take other view.

In the result, appeal of the revenue is dismissed.