ITI, WARD-1(2), THANE WEST vs. M/S M T PHAD - KHERADE ENTERPRISES, THANE

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ITA 370/MUM/2019Status: DisposedITAT Mumbai20 February 2020AY 2010-113 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that penalty cannot be levied on additions based on estimations. It also noted that the tax effect of the penalty was below the monetary limit for appeals, and exceptions for external agency information did not apply.

What were the facts?

The Assessing Officer made an addition on account of estimated bogus purchases and levied penalty under Section 271(1)(c). The CIT(A) deleted the penalty. The Revenue appealed against this deletion.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on additions made on estimation, and whether the appeal by Revenue is maintainable based on monetary limits and exceptions.

Which sections of the Income-tax Act were involved?

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

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI VIKAS AWASTHY

For Appellant: Shri R. Bhoopathi
Hearing: 22/01/2020Pronounced: 20/02/2020

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Thane, dated 15/11/2018 for the A.Y 2010-11, deleting penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).

2.

The addition was made by the Assessing Officer in reassessment proceedings vide order dated 05/02/2015 passed under section 143(3) r.w.s. 147 of the Act by estimating GP @ 20% on alleged bogus purchases. The Assessing Officer vide order dated 19/08/2015 levied penalty u/s 271(1)(c) of the Act on the estimated addition of alleged bogus purchases.

3.

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 further 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.

4.

I have considered the submissions made by ld.Departmental Representative 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 made on estimation. It is a well settled legal position that no penalty is leviable on additions based on estimations. Merely for the reason that addition has been accepted by the assessee does not ipso-facto result in initiation of penalty proceedings. I see no reason to interfere with the impugned order in deleting the levy of penalty.

5.

I further observe that the quantum of penalty which is subject matter of dispute is Rs. 70,770/- 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.

6.

Thus, for the reasons recorded above the appeal of Revenue is liable to be dismissed. I hold and direct accordingly.

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