ITO. W-1(3), THANE vs. KETAN P BHAVSAR, THANE

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ITA 363/MUM/2019Status: DisposedITAT Mumbai07 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 cannot be levied on additions made on estimation. It also noted that the tax effect was below the monetary limit for departmental appeals and that exceptions for external agency information did not apply to penalty appeals.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting the penalty levied under Section 271(1)(c) for alleged bogus purchases. The original addition was made on estimation of profit margin on these purchases.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on additions based on estimation, and if the appeal falls within the monetary limits for departmental appeals.

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, “SMC” BENCH, MUMBAI

Before: SHRI VIKAS AWASTHY

Hearing: 22/01/2020Pronounced: 07/02/2020

आदेश / O R D E R PER VIKAS AWASTHY- JM:

1.

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-1, Thane, dated 26.11.2018 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’).

. Ketan P Bhavsar, Mumbai. - 2 - 2. When the appeal was called for hearing none appeared to represent the assessee. Even no application seeking adjournment has been received from the assessee. As is evident from the acknowledgement card available on record the notice of hearing of appeal was duly served on the assessee. Considering the above, we proceed to decide the appeal with the assistance from learned Departmental Representative and the material available on record.

3.

The addition was made by the Assessing Officer in reassessment proceedings vide order dated 16/03/2015 passed u/s. 143(3) r.w.s. 147 of the Act by estimating GP@ 16.68% on alleged bogus purchases. The Assessing Officer vide order dated 30/09/2015 levied penalty u/s 271(1)(c) of the Act on the estimated addition of alleged bogus purchases.

4.

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 . Ketan P Bhavsar, Mumbai. - 3 - 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.

5.

I have considered the submissions made by ld.DR 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.

6.

I further observe that the quantum of penalty which is subject matter of dispute is Rs.33,316/-

. Ketan P Bhavsar, Mumbai. - 4 - 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.

7.

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

8.

In the result, appeal of the Revenue is dismissed. Order pronounced in the open court after hearing on Friday, the 7th day of February, 2020.

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