DCIT 5(2)(1), MUMBAI vs. M/S KARP IMPEX LIMITED, MUMBAI

PDF · subscribers
ITA 899/MUM/2019Status: DisposedITAT Mumbai19 February 2020AY 2010-115 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 held that penalty proceedings cannot be initiated solely on the basis of estimation of income. Since the income was determined by estimating a percentage on bogus purchases, it was not a proper case for initiating penalty proceedings.

What were the facts?

The Assessing Officer (AO) reopened the assessment based on information about accommodation entries and treated purchases as not genuine, estimating income at 9% under Section 69C. The CIT(A) sustained the addition but reduced the disallowance to 3%. The revenue appealed against the deletion of penalty by the CIT(A).

What were the issues?

Whether penalty proceedings can be initiated on the basis of estimated income from bogus purchases. Whether the CIT(A) erred in deleting the penalty levied on disallowance of bogus purchases.

Which sections of the Income-tax Act were involved?

Section 69C,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “H” BENCH, MUMBAI

Before: SHRI VIKAS AWASTHY, JM & SHRI S. RIFAUR RAHMAN, AM

DCIT 5(2)(1) M/s Karp Impex Ltd. बिधम/ GE 3051, 3rd floor, Bharat Room No. 525, Aayakar Bhavan, M. k. Road, Diamond Bourse BKC Vs. East, Mumbai-400 051 Mumbai-400020 स्थायीलेखासं./जीआइआरसं./PAN No. AABCK1823F (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant : Shri Drop Singh Meena, DR by प्रत्यथीकीओरसे/Respondentby : None सुनवाईकीतारीख/ : 03.02.2020 Date of Hearing घोषणाकीतारीख / : 19.02.2020 Date of Pronouncement आदेश / O R D E R

Per S. Rifaur Rahman, Accountant Member:

1.

The present Appeal has been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals) – 10 in short referred as ‘Ld. CIT(A)’, Mumbai, dated 30.11.18 for Assessment Year (in short AY) 2010-11.

2.

At the outset, it is noticed that none appeared on behalf of assessee in spite of calls and even no application for adjournment was moved. On the other hand, Ld. DR is present in the court and is ready with arguments. Therefore, we have decided to proceed with the hearing of the case ex-parte with the assistance of the Ld. DR and the material placed on record.

3. The brief facts of the case are, based on the information received from the Sales Tax Department about the accommodation entries obtained by the assessee from Bhanwarlal Jain Group. Accordingly, assessment was reopened u/s 147 of the Act and subsequently assessment was completed u/s 143(3) r.w.s 147 of the Act on 17.03.16. AO completed the assessment while treating the transactions of purchase amounting to Rs. 63,65,39,341/- as not genuine and accordingly he estimated the income of the assessee @ 9% as addition u/s 69C of the Act. Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) sustained the addition of bogus purchases, but reduced the disallowance @ 3%. Subsequently, AO initiated penalty proceedings and imposed penalty. Aggrieved with the above, assessee filed appeal before Ld. CIT(A) and Ld. CIT(A) deleted the penalty as no penalty can be imposed on the estimation by relying on various decisions of Coordinate Bench of ITAT in the case of Deepak Gogri vrs ITO and DCIT vrs. Manohar Manak Alloys Pvt. Ltd.

5.

Aggrieved with the above order, revenue has preferred the appeal before us on the ground mentioned herein below:-

1. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty levied on disallowance made on account of bogus purchases which was done on the basis of information received from investigation wing."

2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the case falls in exception as per Board Circular No. 3/2018 with regard to addition/disallowance made on account of information received from external agencies."

3.

The appellant prays that the order of the Ld. CIT(A) be set aside and the order of the AO be restored.

4.

The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.

6.

Considered the submission of Ld. DR and material placed on record. We notice from the records that AO initiated penalty proceedings based on his findings on genuineness of purchases and estimated the income @ 9%, whereas the same was reduced by Ld. CIT(A) @ 3%. It is a fact that income of the assessee was estimated. Accordingly, addition was made u/s 69C of the Act. The various courts have held that penalty proceedings cannot be initiated on the basis of estimation of income. In this case, the addition was made by treating the purchases as non-genuine, at the same time, the sales were accepted as declared by the assessee. Since the income was determined by applying estimation of certain percentage on bogus purchases, therefore, it is not proper case to initiate the penalty proceedings.

Accordingly, we are inclined to agree with the findings of Ld. CIT(A). Therefore, grounds raised by the revenue are dismissed.

More judgments on Section 69C

All 8,217 judgments and leading authorities on Section 69C →

Recent GST High Court judgments

Search GST case law →