SAIMANDEEP INDUSTRIES OF INDIA ,GHAZIABAD vs. AO-WARD-51(92), FARIDABAD
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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: CHANDRA MOHAN GARG & SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), [‘CIT(A)’ in short] dated 11.05.2022 arising from the penalty order dated 11.01.2022 passed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2012-13.
As per its grounds of appeal, the assessee has challenged the imposition of penalty of Rs.1,17,271/- on account of estimated additions towards bogus purchases of Rs.3,79,520/-.
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Briefly stated, the assessee filed its return of income at Rs.83,590/-. The return filed by the assessee was reopened under Section 147 of the Act having regard to the certain information obtained from the Investigation Wing of the Income Tax Department that the assessee is beneficiary of certain accommodation entries of bogus purchases. The assessee in the course of re-assessment proceedings claimed to have filed documentary evidences such as purchase bills, weigh slip, stock register, bank statement, copy of account of the parties, namely, Apex Associates and Supreme Enterprises. The Assessing Officer estimated 12% of the purchases as unexplained and accordingly alleged concealment of income at Rs.3,79,520/- on a total purchase of Rs.31,62,667/- from these parties. The penalty proceedings were invoked and 100% penalty was imposed on the impugned estimated additions at Rs.1,17,271/-.
In the first appeal, the assessee did not get any relief from the CIT(A). Hence this appeal.
We have carefully considered the rivals submissions and perused the orders of the authorities below. The controversy involves imposition of penalty under Section 271(1)(c) on disallowances carried out towards bogus purchases in the realm of estimations. We straightaway note that in order to attract penalty under Section 271(1)(c) of the Act, it is necessary that there must be concealment by the assessee of particulars of its income or furnishing of inaccurate particulars of income per se. Needless to say, before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represents income and the assessee has concealed the particulars thereof or furnished inaccurate particulars. The disallowance in the instant case is on estimated basis on the presumption that
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expenditure incurred is excessive having regard to nature and business activity of assessee and also having regard to the non- availability of cogent evidences to support purchases. Significantly, the assessee, in the instant case, has inter alia pointed out that the purchases do not belong to the Assessment Year 2012-13 in question but the amount outstanding against the respective suppliers are opening balances during the year therefore, no expenditure has been incurred towards bogus purchases in the year. We observe that on this point alone, the imposition of penalty towards disallowance of bogus purchases affected during the year is unsustainable in law.
We also take guidance from the judgment rendered in the case of Vijay Proteins Ltd. vs. CIT (2015) taxmann.com 44 (Guj.) and Sanjay Oil Cake Industries (2009) 316 ITR 274 (Guj.) wherein the penalty imposed under Section 271(1)(c) was struck down in similar circumstances of estimated disallowance towards bogus purchases.
Thus seen from any angle, the penalty imposed is unsustainable in law.
We thus set aside the order of the CIT(A) and direct the Assessing Officer to reverse the penalty imposed in question.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 18/10/2023
Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /10/2023 Prabhat
