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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHY
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Thane, dated 02/11/2018 for the A.Y 2009-10, deleting penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
(A.Y.2009-10) 2. An addition of Rs.3,26,134/- was made by the Assessing Officer in reassessment proceedings on account of alleged bogus purchases made by the assessee. The Assessing Officer vide order dated 16/02/2015 levied penalty u/s 271(1)(c) of the Act on the addition of alleged bogus purchases.
Shri R. Bhoopathi, appearing on behalf of Department, vehemently defended the penalty order and prayed for reversing the findings of the CIT(A). The Departmental Representative submitted that since reopening was done on the basis of information received from external investigating agency, the appeal would not be covered by CBDT Circular dated 08/082019 on monetary limits for filing appeals by the Department.
Shri Sanjay Parikh, appearing on behalf of the assessee vehemently defended the order of CIT(A) in deleting the penalty.
I have considered the submissions made by both sides and have perused the orders of authorities below. Every addition made in assessment proceedings does not automatically lead to levy of penalty u/s. 271(1)(c) of the Act. In the instant case penalty u/s. 271(1)(c) has been levied on the disallowance of bogus purchases. The Assessing Officer has made addition of entire bogus purchases and the same has been accepted by the assessee. The Tribunal in various decisions have consistently held that where sales are not disputed by the Department, entire alleged bogus purchases cannot be disallowed. It is only the GP on alleged bogus purchases that should be disallowed. Thus, the (A.Y.2009-10) entire issue of addition on bogus bogus purchases boils down to estimation of undisclosed GP on alleged bogus purchases. Merely for the reason that addition has been accepted by the assessee does not ipso facto result in initiation of penalty proceedings. Thus, in the facts of the case, I am of considered view that it is not a fit case for levy of penalty u/s. 271(1)(c) of the Act. I find no reason to interfere with the impugned order, hence, the same is upheld.
I further observe that the quantum of penalty which is subject matter of dispute is Rs. 96,880/- only. The Tax effect in this appeal by the Revenue is far less than the limit prescribed by CBDT for filing appeals by the Department before the Tribunal. It would be relevant to mention here that Department appeals emanating from penalty proceedings u/s 271(1)(c) of the Act on the additions consequent to information received from external investigating agencies are not covered by exceptions provided in para 10 of the CBDT circular dated 20.08.2018.