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Facts
The assessee's appeal was filed belatedly due to an erroneous email address being used for communication, leading to an ex-parte order. The delay of 147 days was condoned after the assessee provided reasons related to circumstances beyond their control. The case involves a penalty levied under section 271(1)(c) of the Income-tax Act following additions made on account of bogus purchases.
Held
The Tribunal held that the penalty under section 271(1)(c) is not leviable on additions sustained on an estimated basis, especially when payments were made through account payee cheques. Relying on various judicial precedents, the Tribunal found the facts to be similar and set aside the order of the CIT(A).
Key Issues
Whether penalty under Section 271(1)(c) is leviable on additions made on an estimated basis, and if the delay in filing the appeal can be condoned.
Sections Cited
271(1)(c), 250, 253(3), 132, 143(3), 147, 274, R.W.S.
AI-generated summary — verify with the full judgment below
Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 15.02.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] for the Assessment Year (AY) 2013-14, which in turn arising out of penalty order u/s 271(1)(c) of the Act, dated 17.01.2022.
Grounds of appeal
raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing officer in levying Penalty of Rs.21,757/- u/s 271(1)(c) of the I.T. Act, 1961.
2. It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper.
/AY.2013-14 Sanjay Damjibhai Golakiya 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
The appeal filed by assessee is barred by 147 days in terms of provisions of Section 253(3) of the Act. The assessee has filed an affidavit giving reasons for delay in filing of appeal before the Tribunal. In the affidavit, it has been stated that the appellant filed appeal u/s 253(1) of the Act on 09.09.2024, vide against the order dated 15.02.2024, which was uploaded on the Income-tax e-filing portal. Though the appeal should be required to file within 60 days from the date of communication of the order, but it could not be filed in time because the assessee was unaware of online proceedings. The notices of hearing were issued to the e-mail Id, i.e., ‘ampatel62@india.com’ and ‘caampatel@gmail.com’ instead of e-mail Id of ‘hgoradiya@yahoo.com’, which was mentioned in Form 35. Due to the non- response to the notice of hearing, the CIT(A) was passed an ex-parte order and uploaded the same in online portal on 16.03.2024. The learned Authorized Representative (ld. AR) of the assessee checked the e-filing portal and found that the notice of hearing notices was issued to incorrect email addresses. After downloading the order of CIT(A), he filed an appeal on 09.09.2024 before this Tribunal. Hence, the delay of 147 days in filing the appeal has occurred. The appellant submitted that the delay in filling appeal is neither intentional nor deliberate. It was due to circumstances beyond the control of the appellant. The ld. AR has requested to condone the delay in filing the appeal.
/AY.2013-14 Sanjay Damjibhai Golakiya 4. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue opposed the prayer for condonation of delay. He submitted that the assessee was negligent, inactive and not diligent.
We have heard both the parties on this preliminary issue of delay in filing appeal. In the affidavit, it is submitted that the notices and the order were issued on the wrong e-mail id. Further, the earlier counsel did not inform the appellant about the order of CIT(A) about fate of appeal due to which, the delay of 147 days has occurred in filing appeal before the Tribunal. We find that assessee was not negligent but due to absence of legal advice of earlier tax consultant, there was delay in filing the present appeal. The delay in filing the appeal was not deliberate and intentional on the part of assessee. Moreover, the assessee is not going to be benefitted by filling appeal belatedly. It is now fairly settled that when technical consideration and cause of substantial justice are pitted against each other, the cause of substantial justice may be preferred. Hence, the reasons given in the affidavit for condonation of delay are reasonable and the same would constitute sufficient cause for the delay in filing this appeal. We, therefore, condone the delay and admit the appeal for hearing.
The facts of the case in brief are that against returned income of Rs.4,96,230/-, the Assessing Officer (in short, ‘AO’) assessed the total income at Rs.26,46,230/- by making addition of Rs.21,49,998/- on account of bogus purchases. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act /AY.2013-14 Sanjay Damjibhai Golakiya for furnishing inaccurate particulars of income. The AO has disallowed the entire purchases from M/s Sun Diam, one of the concerns of Rajendra Jain Group, who were found to have provided accommodation entries by way of bogus purchases and sales to various parties. It was so established due to a search and seizure operation conducted u/s 132 of the Act on 03.10.2013 on the concerns of Shri Rajendra Jain group, Shri Dharmichand Jain group and Shri Sanjay Chaudhary group. On appeal, the CIT(A) restricted the addition to the extent of 5% of the impugned purchases. Accordingly, the addition of Rs.1,07,500/- was sustained by the CIT(A). During the penalty proceedings, the assessee submitted that the AO failed to bring any evidence on record that the above amount represents bogus purchases. All payments for the said purchases were done through account payee cheques only. The AO has accepted genuineness of sales but, on the other hand, disallowed purchases made from the impugned party. The CIT(A) restricted addition to 5% of total purchases only on estimation basis. Hence, there is not case of furnishing inaccurate particulars of income. The AO did not accept such explanation and proceeded to levy the penalty because the CIT(A) had partly confirmed the addition made by the AO. He levied minimum penalty of Rs.21,750/- u/s 271(1)(c) of the Act, being 100% of tax sought to be evaded.
Aggrieved by the order of AO, the assessee filed appeal before CIT(A) where appellant raised three grounds including validity of the notice issued u/s 274 r.w.s. 271(1)(c) of the Act and merit of the penalty imposed by the AO. The /AY.2013-14 Sanjay Damjibhai Golakiya CIT(A) issued three notices which were not responded to by the assessee. Hence, he dismissed the appeal by observing that no corroborative submissions were filed in respect of grounds of appeal
. The appeal was also dismissed by him for non-prosecution.
8. Aggrieved by the order of CIT(A), the assessee filed the present appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted that in case of the appellant, the assessment order u/s 143(3) r.w.s. 147 of the Act was passed on 17.11.2016, wherein the entire purchase from M/s Sun Diam, one of the concerns of Shri Rajendra Jain group was treated as bogus and was added to the total income. In appeal, the CIT(A) restricted the said addition to 5% of the impugned purchase. The ld. AR of the assessee submitted that the addition was restricted to 5% of purchase by the CIT(A) on estimation basis. He submitted that it is now fairly well settled that in Income-tax proceedings, no penalty is leviable on addition made on estimated addition. Therefore, the penalty levied by the AO is liable to be deleted. The ld. AR relied upon the decisions in cases of (i) CIT vs. Subhash Trading Co., (1996) 221 ITR 110 (Guj.), (ii) CIT vs. Whitelene Chemicals, 32 taxmann.com 192 (Guj.), (iii) Deepak Banwarial Agarwal vs. ITO, (Surat – Trib.) and (iv) M/s Opulent Jewels Pvt. Ltd., dated 15.11.2018.
On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of lower authorities. He /AY.2013-14 Sanjay Damjibhai Golakiya submitted that the case of revenue right from the beginning is that the assessee has shown bogus purchases and thus, furnished inaccurate particulars of income. The stand of revenue is upheld by the CIT(A) in restricting the addition to the extent of 5% of bogus purchases. Therefore, the penalty u/s 271(1)(c) of the Act should be upheld qua the addition upheld in the quantum appellate proceedings.
We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by the ld. AR. Though the revenue has raised three grounds of appeal, the only effective ground is levy of penalty of Rs.21,757/- u/s 271(1)(c) of the Act. The assessment order was passed on 17.11.2016 u/s 143(3) r.w.s. 147 of the Act by disallowing the entire purchases of Rs.21,49,998/- from M/s Sun Diam, one of the concerns of Shri Rajendra Jain group. The disallowance was restricted to 5% of the impugned purchase by the CIT(A). Thus, it is clear that the addition was sustained on estimation basis. The penalty u/s 271(1)(c) of the Act has been levied on the estimated addition sustained by the CIT(A). The ld. AR has argued that the Hon’ble jurisdictional High Court in cases of Subhash Trading Co. (supra) has held that penalty u/s 271(1)(c) of the Act could not be levied where addition was on estimated basis. The Co-ordinate Bench of ITAT, Surat in cases of Yogendra Raj U Sanghvi, in dated 19.10.2023, Deepak Banwarilal Agarwal, in dated 27.02.2024 and DCIT vs. M/s Opulent Jewels Pvt. Ltd., in ITA No. 1855/AHD/2010/SRT, dated