ITO WARD 3(3), THANE vs. M/S S.D PROCESS EQUIPMENT, THANE

PDF · subscribers
ITA 324/MUM/2019Status: DisposedITAT Mumbai28 January 2020AY 2011-124 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 the CIT(A) rightly deleted the penalty as it was levied on the estimated profit from disputed purchases, not on a direct finding of concealment or intent to evade tax. The penalty was based on an estimation of profit, not on the bogus purchases themselves.

What were the facts?

The Assessing Officer (AO) disallowed bogus purchases of Rs. 19,96,355/- and levied a penalty of Rs. 73,440/- under Section 271(1)(c). The Commissioner of Income Tax (Appeals) deleted the penalty, stating it was levied merely on disallowance of purchases without a finding of concealment or mala fide intention.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied solely on the disallowance of purchases without proving concealment of income or mala fide intention.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI

Before: SHRI VIKAS AWASTHY & SHRI N.K. PRADHAN

For Respondent: Mr. R. Bhoopathi, DR
Hearing: 21/01/2020Pronounced: 28/01/2020

ORDER PER N.K. PRADHAN, A.M.

The appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-2 [in short ‘CIT(A)], Mumbai and arises out of the penalty order passed by the Assessing Officer (AO) u/s 271(1)(c) of the Income Tax Act 1961, (the ‘Act’). Though the case was fixed for hearing on 21.01.2020, neither the assessee nor its authorized representative appeared before the Tribunal on the above date. In view of the non-compliance by the assessee, we are proceeding to dispose off this appeal

S.D. Process Equipment 2 ITA No. 324/M/2019 after perusing the materials available on record and hearing the Departmental Representative (DR).

2.

The grounds of appeal read as under:

1. On facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the penalty by not appreciating the fact that the assessee failed to prove the genuineness of the alleged bogus purchases from the Hawala parties during the course of assessment as well as penalty proceedings.

2. On facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the penalty by not appreciating the fact that the assessee could not produce the alleged bogus parties for verification of genuineness of transaction during assessment proceedings as well as penalty proceedings. 3. On facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the penalty by not appreciating the fact that there was clear intention on the part of the assessee to reduce the taxable income by claiming purchases from non-genuine parties. 4. The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored.

3.

Briefly stated, the facts of the case are that the assessee filed its return of income for the A.Y. 2011-12 on 27.09.2011 declaring total income of Rs. 57,057/-. On the basis of information received from the Sales Tax Department, Govt. of Maharashtra and further findings, the AO observed that the assessee had obtained bogus purchase bills of Rs. 19,96,355/- from 7 entry providers. In the assessment order dated 24.03.2015, the AO estimated the profit @ 12.5% on such disputed purchases of Rs. 19,01,290/- (after deducting input

S.D. Process Equipment 3 ITA No. 324/M/2019 VAT of Rs. 95,064/- which was not debited to P&L A/c). Thus the AO made a disallowance of Rs. 2,37,661/-.

Thereafter, the AO levied a minimum penalty of Rs.73,440/- u/s 271(1)(c) on the disallowance of Rs.2,37,661/-.

4.

Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 27.11.2018, the Ld. CIT(A), by following the decision in Sir Shadilal Sugar Mills (168 ITR 7051)(SC), CIT v. Manjunatha Cotton & Ginning Factory (2013 35 taxamnn.com 250) (Karn.), Dilip N. Shroff v. Jt. CIT (2007) 291 ITR 519 (SC), CIT v. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC), deleted the penalty of Rs.73,440/- on the ground that “the levy of penalty is merely on disallowance of purchases and not finding of concealment of any particular or mala fide intention to reduce taxable income. Addition made on account of disallowance of purchases as bogus automatically cannot justify the penalty levied u/s 271(1)(c) of the Act.

5.

Before us, the Ld. DR submits that the estimation @ 12.5% has been made by the AO not on normal purchases, but on bogus purchases and therefore, the penalty of Rs.73,440/- be affirmed.

6.

We have heard the Ld. DR and perused the relevant materials on record. In the instant case, the AO has not levied the penalty on the disputed purchases. Rather, he has estimated the profit embedded in such purchases at 12.5%. In such a scenario, we are of the considered view that the Ld. CIT(A) has rightly followed the decisions referred at para 4 hereinabove and deleted the penalty.

S.D. Process Equipment 4 ITA No. 324/M/2019

7.

In the result, the appeal filed by the Revenue is dismissed.

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →