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Facts
The revenue filed appeals against the deletion of penalties levied under Section 271(1)(c) for assessment years 2009-10 to 2011-12. The Assessing Officer had reopened the assessment based on information that the assessee, an interior decorator, purchased goods from dealers providing accommodation bills without actual supply. The AO disallowed 25% of alleged bogus purchases and levied penalty. The CIT(A) reduced the disallowance to 12.5% and deleted the penalty.
Held
The Tribunal held that the additions made by the Assessing Officer were on an estimated basis, which was also partly sustained by the CIT(A) on an estimated basis. Following established case laws, the Tribunal affirmed that penalty under Section 271(1)(c) cannot be levied on additions made on an estimated basis.
Key Issues
Whether penalty under Section 271(1)(c) can be levied on additions made on an estimated basis.
Sections Cited
271(1)(c), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI AMIT SHUKLA
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
All the three appeals filed by the Revenue are directed against the orders passed by Commissioner of Income Tax (Appeals), NFAC, Delhi [in short the ld. CIT(A)] for Assessment years 2009-10 to 2011- 12. The revenue is aggrieved by the decision of Ld.CIT(A) in deleting the penalty levied by the Assessing Officer u/s. 271(1)(c) of the Act in all the three years under consideration.
We heard the parties and perused the record. The assessee is an interior decorator. On the basis of information received from Maharashtra State Sales Tax Department that the assessee has purchased goods from certain dealers, which were indulging in providing accommodation bills without actually supplying the materials and upon noticing that the assessee has purchased goods from some of such kind of dealers, the AO reopened the assessment of three years under consideration u/s 147 of the Act. The Assessing Officer completed the reassessments of all the three years by disallowing 25% of those alleged bogus purchases. He also levied penalty u/s. 271(1)(c) of the Act in all the three years. The details of addition made and penalty levied by the Assessing Officer in all the three years are tabulated below: Assessment Year Addition made by A.O Penalty Levied 2009-10 Rs.29,90,150/- Rs.4,61,977/- 2010-11 Rs.14,54,596/- Rs.2,24,374/- 2011-12 Rs.1,64,338/- Rs.25,390/-
In the appeals filed by the assessee against quantum proceedings, the Ld.CIT(A) restricted the disallowance to 12.5% of the value of the alleged bogus purchases.
The assessee also filed appeals before ld CIT(A) challenging the penalty levied in all the three years. The Ld.CIT(A) deleted the penalty in all the three years holding that the penalty u/s. 271(1)(c) of the Act cannot be levied on estimated additions. In this regard the Ld.CIT(A) 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 also the decision rendered by the Hon’ble Gujarat High Court in the case of CIT vs. Subhash Trading Company Ltd., (221 ITR 110). The Ld.CIT(A) has also noticed that the above said decisions rendered by Hon’ble High Courts have been followed by Mumbai Bench of ITAT in the case of Jaisingh H. Solanki vs. ITO (ITA No.2211/Mum/2023 dated 17/10/2023). Accordingly, Ld.CIT(A) deleted the penalty levied for all the three assessment years, hence, the Revenue is aggrieved.