INCOME TAX OFFICER -WARD-41(2)(4), MUMBAI , KAUTILYA BHAWAN, G BLOCK, BKC, BANDRA EAST, MUMBAI vs. PUSHPADEVI SANTKUMAR TOLA, MUMBAI

The present appeal is delayed by 33 days. In the application seeking condonation of delay filed by the Revenue, it has been submitted that due to internal restructuring and transfer of case records and other material, the

The only grievance of the Revenue is against the deletion of penalty levied under section 271(1)(c) of the Act.

We have considered the submissions of the learned DR and perused the material available on record. During the year under consideration, the assessee had shown purchases of Rs.88,29,205 from various parties. Vide assessment order passed under section 143(3) read with section 147 of the Act, the Assessing Officer (“AO”), in the absence of a reply from the alleged vendors regarding various queries pertaining to purchase transactions by the assessee, treated the aforesaid purchases as non-genuine and made an addition of 12.5% of suspicious purchases. In further appellate proceedings, the Tribunal held that since the assessee has disclosed Gross profit on bogus purchases of 2.55% and therefore to give credit for the same, the estimation of profit @10% will be sufficient. Meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated separately. After considering the submissions of the assessee, the AO vide order dated 23/03/2018 passed under section 271(1)(c) of the Act levied a penalty of Rs.2,64,920.

The learned CIT(A), vide impugned order, deleted the penalty levied by the AO on the basis that the addition on account of bogus purchases is made on an estimated basis. Being aggrieved, the Revenue is in appeal before us.

During the hearing, the learned Departmental Representative submitted that since the addition to an extent of 10% of the aforesaid purchases has been affirmed by the Tribunal, therefore the penalty should be sustained to that extent. On the other hand, the learned Authorised Representative submitted that in the present case, all the required details were furnished by the assessee, and in the assessment order the AO also noted that the assessee is having healthy net profit and Gross profit ratio for the year under consideration as compared to the earlier years. It was further submitted that the AO has not doubted the evidence submitted by the assessee. However, merely in the absence of confirmation from the vendors, made an addition to an extent of 12.5% of the total suspicious purchases. Thus, it was submitted that the entire addition made by the AO is on an ad hoc basis and is merely an estimate.

We find that the coordinate bench of the Tribunal in Mun Gems v/s ACIT, [2023] 108 ITR(T) 276 (Mumbai - Trib.) held that ad hoc GP rate applied on alleged bogus purchases to factor in the suppression of alleged gross profit could not be the basis of levying penalty for furnishing of inaccurate particulars of income or concealing particulars of income. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:-

It is evident from the record that the learned CIT(A) has deleted the penalty following the decisions of the coordinate bench of the Tribunal. Accordingly, in view of the aforesaid findings, the impugned order deleting the penalty levied under section 271(1)(c) of the Act is upheld. As a result, grounds raised by the Revenue are dismissed.

In the result, the appeal by the Revenue is dismissed. Order pronounced in the open Court on 02/05/2024