ALPA RAJESH DESAI,MUMBAI vs. ITO 19(1)(1), MUMBAI

Instant appeal of the assessee is preferred against the order of the Learned National Faceless Appeal Centre, Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year2009-10, date of order23.01.2024.The impugned order was emanated from the order of the Ld. Income-tax Officer, Ward 19(1)(1), Mumbai(in short, ‘the

Alpa Rajesh Desai A.O.’) passed under section271(1)(c) r.w.s. 274of the Act date of order29/02/2019.

“1. On the facts and in the circumstances of the case and in law, the CIT(A), hereinafter referred to as the Ld.CIT(A) has levied Penalty u/s. 271(1)(c) of Rs.26,076/-. The penalty may please be deleted. 2. The Assessee craves leave to add, alter, amend or drop any Grounds of Appeal at the time of the Appeal Proceedings.”

3. Brief facts of the case are that the assessment was framed under section 143(3) / 147 date of order 16/03/2015 with an addition @ 12.5% on purchase value of Rs.18,75,349/- as the said purchases is taken as bogus purchase and the profit is estimated amount to Rs.2,34,419/-. The assessee filed an appeal before the ld. CIT(A) and ld. CIT(A) passed an order U/s 250 of the Act and reduced the gross profit @4.50% on bogus purchase as the assessee already declared the gross profit. So, the addition is restricted to Rs. 84,390/- which is @4.50% on bogus purchase amount to Rs. 18,75,349/-. The Ld.AO initiated the penalty proceeding U/s 271(1)(c) r.w.s. 274 of the Act and the penalty is levied amount to Rs.26,076/-i.e.,@100% of tax sought to be evaded. The aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the penalty order and confirmed the penalty. Being aggrieved on appeal order the assessee filed an appeal before us.

Alpa Rajesh Desai 5. The Ld. DR fully relied on the order of the revenue authorities.

“6. We heard the rival contentions and perused the record. We noticed earlier that the Assessing Officer has estimated profit on alleged bogus purchases @ 12.5%, which was reduced to 6% by Ld. CIT(A). Admittedly, addition has been made on an estimated basis in all the three years under consideration. The question is whether penalty under Section 271(1)(c) of the Act could be levied on addition made on estimated basis. This question was examined by the co- ordinate bench in assessee’s own case and it was held that penalty under Section 271(1)(c) of the Act is not leviable on addition made on estimated basis. For the sake of convenience, we extract below the operative portion of the order passed by the co-ordinate bench in Assessment Year 2013-14 :- “9. We have heard the submissions made by rival sides and have examined the orders of the authorities below. Undisputedly, the additions made on account of bogus purchases were partially confirmed by the Tribunal. The assessee failed to discharge its onus in proving genuineness of the purchases and dealers. During assessment proceedings, the addition was made on estimation @ 12.5%. In the first appeal, the addition was restricted to 3% and on further appeal to the Tribunal by the Revenue, the addition was enhanced to 6%. The entire addition right from assessment stage to the Tribunal was merely on estimations. There is no definite finding on the quantum of concealment Alpa Rajesh Desai of income. It is an accepted legal position that penalty under section 271(1)(c) of the Act levied on additions made merely on estimations is unsustainable.

7. Since the facts of the issue under consideration are identical with the facts of the appeal pertaining to Assessment Year 2013-14 decided by the coordinate bench, following the said decision, we hold that the penalty levied under Section 271(1)(c) of the Act is liable to be cancelled in the instant cases since the additions have been made on estimated basis. Accordingly, we set-aside the orders passed by the Ld. CIT(A) in all the three years under consideration and direct the Assessing Officer to delete the penalty levied under Section 271(1)(c) of the Act in all the three years under consideration.

8. In the result, all the three appeals filed by the assessee are allowed.”