ITO 25(3)(1), MUMBAI vs. MADHUBEN PRAKASH PAREKH, MUMBAI

This appeal by the Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)– 6, Mumbai, (herein after referred to as ‘CIT(A)’) dated 12.11.2018 for the A.Y 2010-11, partly

Shri Rushabh Mehta appearing on behalf of the assessee submitted that in the course of reassessment proceedings, the A.O held that the assessee has indulged in bogus purchases to the tune of Rs. 92,01,585/- and made additions of entire such bogus purchases. The assessee carried the issue in appeal before the Ld. CIT(A). The CIT(A) vide order dated 10.01.2018 restricted the addition on account of bogus purchases to 6.5% of such alleged bogus purchases. The Revenue filed appeal before the Tribunal in assailing finding of the CIT(A) in restricting the addition to 6.5% of the alleged bogus purchases. The Tribunal dismissed the appeal of Revenue vide order dated 07.06.2019. 2.1 The A.O initiated penalty proceedings u/s 271(1)(c) of the Act in respect of addition on account of bogus purchases. The A.O vide order dated 20.09.2016 levied penalty of Rs. 28,40,415/- on entire additions made during assessment proceedings. The assessee filed appeal before the CIT(A) against . Madhuben Prakash Parekh, Mumbai. - 3 - penalty order. The CIT(A) confirmed penalty only in respect of bogus purchases confirmed by the Tribunal. Thus, the CIT(A) upheld levy of penalty u/s 271(1)(c) of the Act only to the extent of Rs. 1,01,959/-.

The Ld. AR submitted that the present appeal of the Revenue is liable to be dismissed on account of low tax effect in light of CBDT Circular No. 17/2019 dated 08.08.2019. Even otherwise, the appeal of Revenue is liable to be dismissed on merits as the penalty has been levied on addition made on estimation basis.

On the other hand, Shri K. Bhoopathi representing the department, vehemently defended penalty order dated 20.09.2016. The Ld. DR submitted that this appeal by the revenue falls in exceptions as per para 10 of CBDT Circular dated 20.08.2019, as the information was received from external investigating agencies.

We have heard the submissions made by representatives of rival sides and have perused the orders of the authorities below. The Revenue in . Madhuben Prakash Parekh, Mumbai. - 4 - appeal has assailed the findings of the CIT(A) in restricting the penalty to the extent addition of 6.5% confirmed by Tribunal on alleged bogus purchases. 5.1 It is well settled law that penalty levied on estimated additions is not sustainable. The CIT(A) vide order dated 10.01.2018 had estimated GP @ 6.5% on the alleged bogus purchases. The said findings of the CIT(A) were confirmed by the Tribunal in appeal by the Revenue i.e (supra). The CIT(A) vide impugned order has restricted penalty only on the addition confirmed. The assessee has accepted the impugned order and has not filed any appeal before the Tribunal. We do not find any merit in this appeal by the revenue, accordingly the same is dismissed.

The appeal of the Revenue is also liable to be dismissed on account of low tax effect. The exceptions provided in Para 10 of amendment CBDT Circular dated 20.08.2019 does not apply to penalty proceedings.

In the result appeal of the revenue is dismissed.