ITO WARD-3(3), THANE vs. M/S SHREE SIDDHIVINAYAK STELL TRADERS, THANE

The brief facts of the case as emanating from the records are : In reassessment proceedings, the Assessing Officer held that the assessee made bogus purchases of Rs.3,14,412/- from Macos Iron and Steel Pvt. Ltd. The Assessing Officer made addition of the entire alleged bogus purchases. Further, the Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’). The Assessing Officer vide order dated 30.09.2015 levied penalty of Rs.97,150/- under Section M/s. Shree Siddhivinayak Steel Traders 271(1)(c) of the Act. Aggrieved against the levy of penalty, the assessee filed appeal before the CIT(A). The CIT(A) vide impugned order deleted the penalty. Hence, the present petition by the Revenue assailing the findings of CIT(A) in deleting the penalty.

Shri R. Bhoopathi representing the Department submitted that assessee had indulged in procuring bogus purchase bills from declared hawala dealers. On the said addition made by the Assessing Officer, penalty under Section 271(1)(c) of the Act was levied on account of ‘furnishing of inaccurate particulars of income’. The learned DR submitted that the CIT(A) has deleted the penalty merely on the ground that there was no mala fide on the part of assessee to reduce taxable income. The learned DR prayed for reversing the order of CIT(A) and upholding the penalty order dated 30.09.2015.

We have heard the submissions made by the learned DR and have perused the orders of authorities below. It is a well-settled law that every addition made in assessment proceedings does not result in attracting penal provisions. In the instant case, addition has been made by the Assessing Officer on the entire 100% of the alleged bogus purchases. Apparently, the assessee has accepted the addition on account of smallness of the amount to be contested. Merely on the ground that assessee has not contested the quantum addition, penalty under Section 271(1)(c) of the Act cannot be fastened on the assessee.

Further, while examining the assessment order we observe that the Assessing Officer has initiated penalty proceedings under Section 271(1)(c) of the Act on the charge of filing of ‘inaccurate particulars of income’. However,

The Hon'ble Jurisdictional High Court in the case of CIT vs Samson Perinchery, 392 ITR 4 (Bom) has held that penalty cannot be levied on a ground other than for which the penalty has been initiated. In the instant case, as is observed from the assessment order, penalty has been initiated by Assessing Officer for ‘furnishing of inaccurate particulars of income’ whereas, while passing the order under Section 271(1)(c) of the Act for levy of penalty, the Assessing Officer has made reference to both the charges, i.e. ‘concealment’ and ‘furnishing inaccurate particulars of income’. The manner in which the Assessing Officer has initiated and levied penalty falls short of the legal requirements for levy of penalty under Section 271(1)(c) of the Act and hence, the penalty proceedings fail in judicial scrutiny. We find no merit in the appeal of Revenue, hence, the same is dismissed.

In the result, appeal of the Revenue is dismissed.