GRAFICA FLEXTRONICA,MUMBAI vs. ACIT 25(2), MUMBAI

The assessee has raised the following grounds of appeal:

1. (a) Under the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in confirming penalty u/s 271(1)(c) of Income tax Act, 1961 (lithe Act") on estimated GP addition made of Rs.6,59,220/- on purchase made from parties alleged to be suspicious/Hawala dealers. (b) Under the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in confirming penalty in a case where estimated addition at specific percentage of purchase was made purely on conjecture and no adverse 1 Mum 2018-M/s Grafica Flextronica conclusive finding made by AO or CIT (A) disproving genuineness of purchases.

Brief facts of the case are that the assessment was completed under section 143(3) of the Act on 19.03.2013. The Assessing Officer while passing the assessment order made disallowance on account of bogus purchases of Rs. 6,37,894/- ( being 25% of total purchases of Rs. 28,78,959/-) and initiated the penalty under section 271(1)(c). Thereafter, the assessment reopened under section 147 on 28.01.2016. The reopening assessment was completed under section 143(3) r.w.s. 147 on 28.01.2016. In the assessment order dated 28.01.2016 the assessing officer further made disallowance of purchases of Rs. 4,08,327/- ( 25% of purchases of Rs. 13,61,091/-) was made. The assessment was rectified vide order under section 154 dated 21.06.2016 restricting the purchases to Rs. 3,40,273/-. On appeal before the ld. CIT(A), the addition of Rs. 637894/- ( being 25% of total purchases of Rs. 28,78,959/-) made in assessment order sated 19.03.2013 was partly confirmed to the extent of Rs. 3,18,948/- ( 12.5% of Rs. 28,78,959/-) and 2 Mum 2018-M/s Grafica Flextronica remaining addition of Rs. 3,40,273/- that is total of Rs. 6,59,220/- was sustained. Thereafter, a fresh show notice issued by Assessing Officer for levying the penalty vide notice dated 08.07.2016. The assessee filed its reply dated 19.07.2016. In the reply, the assessee stated that assessee had no intention to conceal the income and has not furnished any incorrect particulars. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer levied 100% of penalty on the tax sought to be evaded vide his order dated 29.07.2016 levying the penalty of Rs. 2,03,700/-. On further appeal before the ld. CIT(A), the action of Assessing Officer in levying the penalty was confirmed. Thus, further aggrieved, the assessee has filed the present appeal before us.

We have heard the submission of ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the revenue and perused the material available on record. The ld. AR of the assessee submits that no penalty was leviable against the assessee as the addition in the quantum assessment was estimated/adhoc basis. The ld. AR of the assessee submits that assessee furnished complete details of his purchases to substantiate his expenses incurred on account of purchases during the relevant period. The Assessing Officer made addition on adhoc basis @ 25% which was further restricted to 12.5% of the purchases in respect of three parties. In respect of one more party the addition on account of bogus purchase was also made @ 25% of such purchases. It was argued that no 3 ITA No. 295 Mum 2018-M/s Grafica Flextronica penalty levied on the basis of estimated/adhoc additions. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in Sushil Chhatrabhuj Raheja Darshan Bheda & Associates vs. ACIT in ITA No. 1375, 1376 & 1377/Mum/2017 dated 29.09.2017 (authored by same combination). The ld. AR of the assessee, thus, submits that the grounds of appeal raised by assessee are principally covered in favour of assessee.

Therefore, considering the fact of the present case and in view of the above aforesaid decision, we are of the view that this is not a fit case for levying of penalty under section 271(1)(c) of the Act. Hence, the grounds of appeal