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

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ITA 2790/MUM/2015Status: DisposedITAT Mumbai31 March 2017AY 2003-042 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty is not sustainable if the addition is based on estimations, as there was no clear basis for the 30% estimation by the CIT(A). Therefore, the penalty was not legally valid.

What were the facts?

The assessee's appeal concerned a penalty levied under Section 271(1)(c) related to an addition made for bogus purchases. The Assessing Officer made an addition of 100% of suspected bogus purchases, which the CIT(A) restricted to 30%.

What were the issues?

Whether penalty under Section 271(1)(c) is sustainable when the addition is based on an estimated percentage of bogus purchases.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI SANDEEP GOSAIN

For Respondent: Ms. Anju Garodia, DR
Hearing: 11.03.2017Pronounced: 31.03.2017

सुनवाई की तायीख / Date of Hearing : 11.03.2017 घोषणा की तायीख /Date of Pronouncement : 31.03.2017 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

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.

2.

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/-.

4.

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

by the assessee are allowed.

5. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 31st March, 2017.

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