M. PATWARI TRADERS P. LTD,MUMBAI vs. ITO 1(2)(3), MUMBAI

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ITA 6037/MUM/2018Status: DisposedITAT Mumbai02 December 2019AY 2009-102 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the levy of penalty under Section 271(1)(c) was unjustified. It reasoned that the disallowance was based on an estimate, the assessee provided necessary documentary evidence, and the inability to produce concerned parties did not amount to contumacious conduct warranting a penalty.

What were the facts?

The assessee's appeal concerns a penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was based on a disallowance of bogus purchases, where gross profit was estimated and deducted from the declared gross profit.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when disallowance of purchases is on an estimated basis and the assessee has provided documentary evidence.

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 Shamim Yahya (AM) & Shri Amarjit Singh (JM)

For Appellant: Shri G.S. Pikale
For Respondent: Shri Chaitanya Anjaria
Hearing: 03.09.2019Pronounced: 02.12.2019

This appeal by the assessee is directed against the order dated 28.9.2018 and pertains to A.Y. 2009-10.

2.

The issue raised is that learned CIT(A) erred in upholding the levy of penalty u/s. 271(1)(c) of the Act amounting to Rs. 9,12,542/-.

3.

Brief facts of the case are that for the disallowance of bogus purchase in the case of the assessee gross profit was estimated at 12% and thereafter gross profit already declared @ 8.94% was deducted for the disallowance at Rs. 29,53,210/-. Penalty u/s. 271(1)(c) of the Act was also levied the same was confirmed by learned CIT(A).

4.

Against this order the assessee is in appeal before the ITAT. We have heard both the counsel and perused the records. We find that the disallowance of purchase has been done on estimate basis. The assessee has submitted all the necessary documentary evidence. Adverse inference is drawn only on the 2 M/s. M. Patwari Traders Pvt. Ltd.

ground assessee was not able to produce concerned parties. In our considered opinion assessee’s conduct by no stretch of imagination is considered to be contumacious so as to warrant levy of penalty u/s. 271(1)(c) of the Act. The assessee has given all necessary documents for purchases. Sales were not doubted. As a matter of fact, on this issue Hon'ble Jurisdictional High Court in the case of Nikunj Eximp Enterprises (in Write Petition No. 2860, order dated 18.6.2014) has expounded that no disallowance for bogus purchases should be done. Hence, mere non-response from the suppliers cannot be lead to levy of penalty u/s. 271(1)(c) of the Act when disallowance in an estimate basis. Hence, in our considered opinion on the facts and circumstances of the case levy of penalty u/s. 271(1)(c) of the Act is unjustified. Hence, we set aside the orders of the authorities below.

Order has been pronounced in the Court on 2.12.2019.

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