SUSHIL CHHATRABHUJ RAHEJA,MUMBAI vs. ACIT 25(1), MUMBAI

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ITA 1375/MUM/2017Status: DisposedITAT Mumbai29 September 2017AY 2011-125 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 additions made on an ad hoc or estimated basis. The assessee's contention that no penalty is leviable on estimated additions was accepted.

What were the facts?

The Assessing Officer made additions on account of alleged bogus purchases based on estimation. The assessee argued that no penalty is leviable on estimated additions. The Commissioner (Appeals) confirmed the penalty.

What were the issues?

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

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Assessee represented by : Sh. Viraj Mehta (AR) Revenue represented by : Sh. Ram Tiwari (Sr –DR) Reserve for order : 24.08.2017 Date of order : 29.09.2017 Order under section 254(1) of Income-tax Act Per Pawan Singh Judicial Member; 1. This group of three appeals by assessee are directed against the different orders of Commissioner (Appeals) dated 28th December 2016 for assessment year 2010-11, 2011-12 and 2012-13. The learned Commissioner (Appeals) in the impugned order(s) confirmed the penalty levied by assessing officer under section 271(1)( c) of the Act. Facts of all the cases are almost similar except variation in figures of penalty.

Considering the commonality of fact and identical grounds of appeal all Sushil Chhatrabhuj Raheja the appeals were heard together and are decided by common order. For appreciation of fact we are referring the fact for assessment year 2010-11 in ITA No.1377/M/2017. The assessee has raised following grounds of appeal; (a) The ld Commissioner (Appeals) erred in levying penalty under section 271(1) (c) of the Act on the ground that the additions has been made on and estimate basis and that in case of estimation no penalties leviable. (b) The learned Commissioner (Appeals) has erred in confirming the penalty of Rs. 1,31,810/- levied by the assessing officer. (c) The appellant contends that the addition is in contravention to the Principle of Natural Justice and to be deleted.

2. Brief facts of the case are that the assessee is engaged in the business of trading and distribution of Ready-made Garments, filed its return of income for relevant assessment year on 30th September 2010 declaring total income at Rs. 15,73,500/-. The return was processed and accepted under section 143(1). Subsequently, the return of income was reopened under section 147 vide notice dated 27th December 2013 issued under section 148. The assessment under section 143(3) read with section 147 was completed on 30 January 2015. The assessing officer while passing the assessment order made the addition on account of bogus purchases under section 37 of the Act. The assessing officer made the addition of Rs. 4,26,571/- being 25% of the alleged bogus purchases in the assessment order. The assessing officer initiated penalty while completing the assessment proceedings. The assessing officer levied the ITA No.1375-77/M/2017 Sushil Chhatrabhuj Raheja penalty @ 100% of the tax sought to be evaded vide order dated 21 July 2015. The AO levied a penalty of Rs. 1,31,810/-. On appeal before Commissioner (Appeals) the order of penalty was sustained. Thus, further aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.

3. We have heard ld AR of the assessee and DR for revenue and perused the material available on record. The learned AR of the assessee argued that the assessee has neither concealed the income nor furnished inaccurate particulars thereof. The assessee furnished complete detail of his purchases to substantiate his expenses incurred on account of purchases during the relevant assessment year. The assessing officer made the addition only on the estimation basis on account of the alleged bogus purchases. It was argued that no penalty is leviable on the addition made on the basis of estimation/ad hoc basis. In support of the submission the ld AR of the assessee relied upon the following decision; (i) CIT Versus Ravail Singh & Company 254 ITR 191(P&H), (ii) Harigopal Vs CIT 258 ITR 85 (P&H HC), (iii) ITO Vs Bombaywala Readymade Store[2015]230Taxman 313(Guj H C), (iv) Naresh Chand Aggarwal Versus CIT 357 ITR 515 (All HC), (v) DCIT Versus Manohar Manak ITA 5586/Mumbai/2015, (vi) Yashraj Films Pvt Ltd Versus ACIT ITA 7519/Mumbai/ 2013, (vii) Sarvesh Mercantile Private Ltd Vs ACIT ITA 6040/M/ 2013 and (viii) DCIT versus Risabh Impex ITA 93/Mumbai 2011.

4.

On the other hand the learned and AR for the revenue supported the order of authorities below. It was argued that the investigation wing of 3 Sushil Chhatrabhuj Raheja the income tax Department made the full-fledged enquiry about the racket of hawala dealers who were involved in providing accommodation entries with of sale and purchase of the material. The assessee was one of such beneficiary who availed accommodation entry for inflating the profit.

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.

ITA No.1375, 1376/M/2017 for AY 2011-12 and 2012-13 6. The assessee has raised identical grounds of appeal for both the assessment years; the facts of both the years are almost similar except variations of figure of penalty. Considering the facts that we have allowed the appeal for AY- AY 2010-11and deleted the penalty; hence, following Sushil Chhatrabhuj Raheja the principal of consistency both the appeals of the assessee are allowed with similar findings.

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