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Income Tax Appellate Tribunal, A Bench, Mumbai
Before: Shri C.N. Prasad & Shri Rajesh KumarShri Asit P. Desai
This appeal filed by the assessee is directed against the order of the CIT(A)-37, Mumbai dated 02.03.2017 and it relates to A.Y. 2009-10.
The only issue raised by the assessee in the various ground of appeal is against the confirmation of penalty by the CIT(A) of `83,978/- as imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter "the Act").
3. At the outset the learned A.R. submitted before the Bench that the issue involved in the present appeal is squarely covered in favour of the assessee and therefore the same should be allowed. The learned A.R. submitted that the AO has added 25% of the bogus purchases to the assessee , which was confirmed by the CIT(A) in the appellate proceedings. The learned A.R. submitted that since this is a case of addition on estimation of income, therefore penalty is not leviable. In defence of his
Shri Asit P. Desai arguments, the learned A.R. relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Aero Traders (P) Ltd. (2010) 322 ITR 316 and the decision of the Hon'ble P&H High Court in the case of Harigopal Singh vs. CIT (2002) 258 ITR 85. The Hon'ble Delhi High Court has confirmed the decision of the Tribunal wherein the Tribunal has held that in the case of addition based upon guess work cannot be subject matter of concealment of income for the imposition of penalty. The Hon'ble P&H High Court has held that where the income of the assessee is assessed on estimation basis penalty under Section 271(1)(c) is not attracted. The learned A.R. challenged imposition of penalty on legal issue. The learned A.R. pointed out that in the assessment order the AO has initiated penalty proceedings for concealment of income on page 8 of assessment order whereas in the penalty order penalty was finally imposed for furnishing inaccurate particulars of income as stated in para 7 of the penalty order. The learned A.R. submitted that initiation of penalty on one of the two charges, i.e. concealment of income and finally the imposition was on other charge, i.e. furnishing of inaccurate particulars of income is not permissible under the Act. Besides the learned A.R. also drew our attention to the notice issued under Section 271(1)(c) of the Act, which is filed at page 9 of the Paper Book which the AO has issued in the standard format without striking out the irrelevant part of the two limbs or specify the one ofthe two limb on which the penalty is imposed which shows the non application of mind by the AO. To defend his argument the learned A.R. relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery, Income Tax Appeal No. 1154 of 2014 and prayed that in view of the ratio laid down by the Hon'ble High Court that the penalty should be deleted on account of non application of mind by the AO.
The learned D.R., on the other hand, relied on the orders of Authorities below by submitting that the penalty has been rightly levied.
After hearing both the parties and perusing the record, we find that in the present case the income is calculated by applying percentage on bogus purchases and the AO imposed penalty only on the said addition.
Shri Asit P. Desai We observe that penalty cannot be imposed in the case where income is estimated or addition is made on guess work. The case of the assessee is supported by the decision of the Hon'ble P&H High Court in the case of Harigopal Singh wherein it has been held that penalty is not imposed under Section 271(1)(c) of the Act in the case of assessment of income of estimation basis. Therefore on this count alone the penalty as imposed by the AO cannot be sustained. On the second plea of the assessee, i.e. the AO has initiated penalty proceedings for concealment of income whereas it was finally imposed for furnishing of inaccurate particulars and that the notice issued in the standard format is also a case of non application of mind by the AO as the principle of natural justice has not been applied by the action of the AO. In this case the assessee is not given opportunity as on which limb the penalty is being imposed, therefore the assessee could not be heard on the particular charge on which the penalty was imposed. The case of the assessee is squarely covered by the decision of the Hon'ble Bombay High Court in the case Samson Perinchery (supra) wherein it has been held that where the AO has initiated penalty on one limb and imposed penalty on the other limb shows non application of mind by the AO. Similarly not striking out of the redundant limb of the notice, i.e. not mentioning whether the penalty is for concealment of income of furnishing of inaccurate particulars of income shows non application mind on the part of AO and in that case the penalty has to be deleted. We, therefore, of the considered view that the order of penalty is bad in law for the reasons as discussed hereinabove and accordingly direct the AO to delete same by setting aside the order of the CIT(A).
In the result, the appeal filed by the assessee is allowed.