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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee under Section 253 of Income-tax Act is directed against the order of ld. CIT(A)-37, Mumbai dated 20.02.2017, which in turn arises from the penalty levied under section 271(1)(c) of the Act by assessing officer vide its order dated 24.09.2015 for Assessment Year 2009-10. The assessee has raised the following grounds of appeal:
1. On facts and circumstances of the case and in law, the learned Commissioner (Appeals) failed to note that penalty order passed by the learned Assessing Officer U/S 271 (1) (c) of the Income Tax Act, 1961 was without jurisdiction - as the penalty proceedings had been initiated on basis of a defective notice which did not specify the offence for which the Appellant was being charged. The penalty order U/S 271 (1) (c) is clearly illegal and deserve to be quashed in appeal.
Mum 2017-Pyramid Industries
2. On facts and circumstances of the case and in law, the learned Commissioner (Appeals) erred in sustaining the order of the learned Assessing Officer levying penalty U/S 271 (1) (c) of the Income Tax Act, 1961 at Rs. 4,95,846 when the Appellant had neither concealed particulars of its income nor furnished inaccurate particulars of its income so as to deserve this penalty. The penalty levied U/S 271 (1) (c) at Rs. 4,95,846 may therefore, please be deleted in appeal.
3. Both the learned Commissioner (Appeals) and the learned Assessing Officer erred in passing their respective orders without granting the Appellant an adequate opportunity of being heard. The orders passed by them are in contravention of the principles of natural justice and hence, bad in law. 4: The Appellant reserves right to add, alter, amend or delete any grounds of appeals with permission of the Hon'ble Tribunal.
Brief facts of the case are that the assessee is a Partnership firm engaged in the business of Paver Blocks. The assessment for Assessment Year 2009-10 was completed on 23.03.2015 under section 144 r.w.s 147 of the Act. The Assessing Officer while passing the assessment order determined the total income of assessee at Rs. 64,88,633/- against the return of income of Rs. 48,83,945/-. The Assessing Officer made the addition of Rs. 16,04,679/- on account of bogus purchases being 23% of total purchases of Rs. 69,76,866/-. The Assessing Officer made the addition on the basis of information received from Sale Tax Department that assessee is one of the beneficiaries who have obtained bogus bills. The Assessing Officer initiated the penalty proceeding under section 271(1)(c). A notice under section 274 r.w.s 271(1)(c) dated 23.03.2015 was served upon the assessee. Initially the assessee has not filed reply. Hence, the assessing officer issued another notice dated 10.07.2015 to the assessee. In response 2 Mum 2017-Pyramid Industries to the notice dated 10.07.2015, the assessee filed its reply dated 08.08.2015. In reply, the assessee contended that the addition made by Assessing Officer are erroneous, unjust and unlawful, therefore, the penalty cannot be levied. The assessee further contended that the assessee neither furnished any inaccurate particular nor concealed any income. The addition was made by assessing officer only on the basis of difference of opinion. The contention of assessee was not accepted by Assessing Officer. The Assessing Officer levied the penalty @ 100% of the tax sought to be evaded. The Assessing Officer worked out the penalty of Rs. 4,95,846/- vide its order dated 24.09.2015 passed under section 271(1)(c).
On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Thus, further aggrieved, the assessee has filed the present appeal before us.
We have heard the ld. Authorised 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 the Assessing Officer made the addition on account of bogus purchases on estimate basis. The ld. AR of the assessee submits that no penalty is leviable on estimated addition. In support of his submission, the ld. AR of the assessee relied upon the decision of Mumbai Tribunal in Sushil Chhatrabuj Raheja vs. ACIT in ITAs No. 1375, 1376 & 1377/Mum/2017 Mum 2017-Pyramid Industries dated 29.09.2017 and Sameer D. Punjabi vs. ITO in ITA No. 1564/Mum/2017 dated 10.11.2017.
On the other hand, the ld. DR for the Revenue supported the orders of authorities below.
We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on the various case law cited by lower authority in their orders. A perusal of assessment order reveals that assessee has shown purchases of Rs. 69,76,866/- from seven parties, which were found to be doubtful in view of the information received from Maharashtra Sales Tax Department. The Assessing Officer not added the entire amount of purchases to the return of income, added only 23% of possible/estimated profit and resulting in addition of Rs. 16,04,679/-. The Assessing Officer levied the penalty under section 271(1)(c) on such estimated addition. The assessee before the lower authorities has urged that addition was made on the basis of difference of opinion and no penalty is leviable on such estimated addition. It is settled law that addition made by Assessing Officer by resorting the estimation of profit element on alleged bogus purchase, no penalty is sustainable. Similar view was taken by Tribunal in case of Sushil Chhatrabuj Raheja (supra) (authored by same combination). Again in case of Sameer D. Punjabi (supra) (authored by ld. AM). Similar view was taken. 4 ITA No. 3269 Mum 2017-Pyramid Industries
Considering the above factual discussion and respectfully following the same, we hold that no penalty is leviable under section 271(1)(c) on adhoc/estimated addition. Therefore, we are of the opinion that it is not a fit case for levy of penalty. Hence, grounds of appeal raised by assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 26/09/2018.