MAHARASHTRA STEEL TRADERS (INDIA),MUMBAI vs. CIT(A) 32, MUMBAI

This appeal filed by the assessee on 11.5.2015 is against the order of the CIT (A)-32, Mumbai dated 4.3.2015 for the assessment year 2003-2004.

In this appeal, assessee raised three grounds and they revolve around the issue relating to the levy of penalty u/s 271(1)(c) of the Act amounting to Rs. 1,65,624/-. 3. Before us none appeared to represent the case of the assessee despite the intimation. Order sheet suggests that the acknowledgement of the Ld Counsel for the assessee regarding the posting of the case today. Ld DR for the Revenue brought our attention to the facts of the case and mentioned that this is a case of bogus purchases involving accommodation entries / bogus bills. AO made addition of Rs. 18.40 lakhs ie 100% of the suspected bogus purchases. On appeal, CIT (A) restricted the addition to Rs. 5,52,080/- being 30% of the above. The present penalty proceedings of Rs. 1,65,624/- relates to the said addition of Rs. 5,52,080/-.

After hearing the ld DR for the Revenue, we find, this is the case of addition on account of bogus bills. What is finally confirmed by the CIT (A) is based on the estimation @ 30% of the said addition of Rs. 18.4 lakhs ie Rs. 5,52,080/-. As such, we did not find the basis for such ad-hoc percentage. Further, it is a settled legal position that the penalty are not sustainable if the addition is based on estimations. Therefore, we are of the opinion, the penalty levied by the AO, sustained by the CIT (A) is not legally valid. Accordingly, the order of the AO and the CIT (A) are required to be reversed. Accordingly we order. Thus, the grounds raised