JAY SCIENTIFIC CO.,MUMBAI vs. ACIT 25(2), MUMBAI

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ITA 3211/MUM/2017Status: DisposedITAT Mumbai15 October 2018AY 2009-104 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 penalty under Section 271(1)(c) is not leviable on ad hoc or estimated additions. Relying on a co-ordinate bench decision, the penalty was deleted.

What were the facts?

The Assessing Officer made an addition on account of bogus purchases based on information from the Sales Tax Department, estimating 25% of purchases from suspicious dealers. The CIT(A) confirmed this addition and the subsequent penalty.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied on additions made on an ad hoc or estimated basis.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

PER PAWAN SINGH, JUDICIAL MEMBER;

1.

This appeal by assessee under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-37, Mumbai dated 03.03.2017 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal:

The following grounds of appeal are without prejudice to each other:

1. The Learned Assessing Officer (AO) has erred in passing and the Hon'ble CIT (A)-37 has erred in law and in facts in confirming the order u/s 271(1)(c) of the Income Tax Act, 1961 ("the Act") which is bad in law, illegal and void.

2. The Learned Assessing Officer has erred in passing and the Hon'ble CIT (A)- 37 has erred in law and in facts in confirming the penalty order u/s 271 (1)(c) in gross violations of principles of natural justice.

3. The Hon'ble CIT(A)-37 has erred in confirming penalty u/s 271 (1)(c) levied by assessing officer without specifying whether it is for concealment of income or furnishing in accurate particulars of income. Hence, it is totally incorrect.

Mum 2017-M/s Jay Scientific Co.

4. The Hon'ble CIT(A)-37 has erred in confirming penalty u/s 271 (1)(c) of Rs. 1,24,000/- levied by learned assessing officer on addition made on agreed and estimated basis of purchases from suspicious dealers.

5. The Hon'ble CIT(A)-37 has erred in confirming penalty u/s 271 (1)(c) levied by learned assessing officer only on the basis of information from Sales Tax Department website without any concrete evidence. 2. Brief facts of the case are that the assessment for the Assessment Year 2009-10 was completed on 24.03.2015 under section 143(3) r.w.s 147 of the Act. The Assessing Officer while passing the re-assessment order made addition on account of bogus purchases on the basis of information received from the Sales Tax Department, Government of Maharashtra. The Assessing Officer made the addition of 25% of the aggregate purchases shown from the alleged hawala traders. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded on such addition made on adhoc basis.

On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Thus, further, aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.

3.

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 is leviable on the addition made by Assessing Officer on adhoc basis. In support of his submission, the ld. AR of the assessee relied upon the decision of Tribunal in Sushil Chhatrabhuj Raheja vs. ACIT in to 1377/Mum/2017 dated 29.09.2017 (authored by same ITA No. 3211 Mum 2017-M/s Jay Scientific Co. combination). On the other hand, the ld. DR for the Revenue supported the order of authorities below.

4.

We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on various case law relied by lower authorities. It is an admitted fact that the Assessing Officer made addition in re-assessment proceeding @ 25% of the purchases from the parties who were declared as tainted /hawala dealers by sales tax department Government of Maharashtra. The addition was admittedly made on adhoc basis. The Co-ordinate Bench of Mumbai Tribunal in Sushil Chhatrabhuj Raheja (supra) while considering the similar facts passed the following order:

5.

We have considered the rival submission of the parties and have gone through the orders of authorities below. The perusal of assessment order reveals that the assessing officer, while passing the assessment order under section 143(3) rws 147, made the addition on the basis of estimation. The assessing officer made addition @ 25% of the alleged bogus purchases. The revenue has not disputed that additions were made merely on the basis of estimation. It is settled law that no penalties is leviable under section 271(1)(c) for ad hoc /estimated additions. Similar view has been taken in the various decisions cited by learned AR for the assessee. Accordingly, we are of the opinion that this is not a fit case for levy of penalty. In the result the grounds of appeal raised by the assessee is allowed.

Mum 2017-M/s Jay Scientific Co.

5. Considering the decision of Tribunal in Sushil Chhatrabhuj Raheja (supra), the penalty levied by Assessing Officer under section 271(1)(c) of the Act is deleted.

6.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 15/10/2018.

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