ITO, W-3(4), KALYAN vs. HITESH N MEWADI, THANE

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ITA 364/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 not every addition automatically leads to a penalty. In cases of alleged bogus purchases, only the Gross Profit should be disallowed, not the entire amount. Therefore, the penalty was not leviable.

What were the facts?

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

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on the entire amount of alleged bogus purchases when sales are not disputed, and if the appeal by the Revenue is maintainable based on monetary limits.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI VIKAS AWASTHY

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 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’).

. Hitesh N Mewadi, 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 of learned Departmental Representative and the material available on record.

3.

The addition was made by the Assessing Officer in reassessment proceedings on account of alleged bogus purchases. The Assessing Officer vide order dated 28.07.2015 levied penalty u/s 271(1)(c) of the Act on the 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 since reopening was done on the basis of information received from external investigating agency, the . Hitesh N Mewadi, Mumbai. - 3 - 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. 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 entire issue of 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

. Hitesh N Mewadi, Mumbai. - 4 - 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.

6.

I further observe that the quantum of penalty which is subject matter of dispute is Rs. 44,992/- 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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