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Facts
The Assessing Officer reopened the assessment and added Rs. 21,59,637/- for alleged bogus purchases. This addition was sustained partially on an estimated basis by the Tribunal in a prior order. Subsequently, a penalty of Rs. 7,34,063/- was imposed under section 271(1)(c) and confirmed by the CIT(A).
Held
The Tribunal held that penalty under section 271(1)(c) cannot be levied on additions made on an estimated basis. The Tribunal relied on various High Court and Co-ordinate Bench decisions supporting this proposition.
Key Issues
Whether penalty under section 271(1)(c) can be imposed on additions made on an estimated basis?
Sections Cited
271(1)(c), 147
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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: JUSTICE (RETD.) C V BHADANG, HON’BLE& SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
The assessee has filed this appeal challenging the order dated 14/02/2024 passed by Commissioner of Income Tax (Appeals) [in short the ld. CIT(A)], NFAC, Delhi, wherein he has confirmed the penalty of Rs.7,34,063/- made by the Assessing Officer u/s. 271(1)(c) of the Income Tax Act, 1961[in short ‘the Act’] for Assessment Year 2009-10.
We have heard the parties and perused the record. The Assessing Officer reopened the assessment of the assessee u/s. 147 of the Act upon receiving information that the assessee has availed accommodation entries in the form of bogus purchases to the tune of Rs.21,59,637/- from hawala operators. Since, the assessee did not respond to the notices issued by the Assessing Officer, the Assessing Officer completed the assessment to the best of his judgment making addition of aforesaid purchases amount of Rs.21,59,637/-. When the matter reached before the Tribunal, the Tribunal, vide its order dated 02-06-2017 dismissed the appeal of assessee on account of non- appearance of the assessee. Upon receipt of above said appellate order of Tribunal, the Assessing Officer imposed a penalty of Rs.7,34,063/- u/s. 271(1)(c) of the Act on the addition of alleged bogus purchases. The same was confirmed by the ld.CIT(A) and hence the assessee has filed this appeal challenging the confirmation of penalty.
The ld.A.R submitted that the ex-parte order dated 02/06/2017 passed by the Tribunal has been recalled by the Tribunal by its order passed in the Miscellaneous Application filed by the assessee. Subsequently, the appeal of the assessee was again disposed of by the Tribunal, vide its order dated 26/12/2018 passed in wherein it was partly allowed by restricting the addition to 25% of the alleged non-genuine purchases. The ld. A.R submitted that addition made by the Assessing Officer has thus been sustained partially on estimated basis.
The ld A.R further submitted that it is settled proposition of law that the penalty u/s. 271(1)(c) of the Act cannot be imposed on the additions made on estimate basis. In support of the above said legal proposition, the Ld A.R placed his reliance on the following case laws:-
(a) Mr. Mohammed Sharif vs. ITO, 2019 ITL 3052
(b) M/s. Sushma Nitin Patil vs. ITO ( 22/02/2023.
(c)Mukesh Shaligram Sharda vs. ITO, (ITA No.1907 & 1908/ Mum/2021, dated 22/02/2023. In all the above said cases, it has been held that the penalty u/s 271(1)(c) of the Act cannot be levied on the estimated additions. We notice that the Co-ordinate Bench, in the case of Mukesh Shaligram Sharda (supra) has followed the decision rendered by Hon’ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading & Rubber Industries, 360 ITR 580 and Hon’ble Gujarat High Court in the case of CIT vs. Subhash Trading Co. Ltd., 221 ITR 110 in this regard.
In the instant case, the Tribunal has sustained addition relating to alleged bogus purchases on estimate basis. Accordingly, following the above said decisions of Hon’ble High Courts and co-ordinate benches, we hold that the penalty cannot be levied u/s. 271(1)(c) of the Act on such kind of estimated additions, Accordingly, we set aside the order passed by Ld CIT(A) and direct the Assessing Officer to delete the impugned penalty.
In the result, the appeal filed by the assessee is allowed.