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www.taxpublishers.in Income Tax Act, 1961, Section 271(1)(c) Penalty under section 271(1)(c)--*Leviability--Addition on account of bogus purchases--Addition based on estimations* *Conclusion:* No penalty under section 271(1)(c) would be leviable on estimated additions. AO, in absence of sufficient material to prove genuineness of purchases, made addition of 12.5% of total purchases. Thereafter, he levied penalty under section 271(1)(c). CIT (A) deleted the penalty. *Held:* CIT (A), by following the decision of Co-ordinate Bench of Tribunal in the case of Mukesh Shaligram Sharda v. ITO [ITAs No. 1907 & 1908/MUM/2021, dated 22-2-2023] : 2023 TaxPub(DT) 2817 (Mum-Trib), deleted the penalty holding that no penalty under section 271(1)(c) was leviable on estimated additions. Since finding of CIT (A) were based on decision of Co-ordinate Bench of Tribunal, there was infirmity in the same and hence, order of CIT (A) was upheld. *Decision:* In assessee's favour *Referred:* Mukesh Shaligram Sharda v. ITO [ITAs No. 1907 & 1908/MUM/2021, dated 22-2-2023] : 2023 TaxPub(DT) 2817 (Mum-Trib) IN THE ITAT, MUMBAI BENCH B.R. BASKARAN, A.M. & SANDEEP SINGH KARHAIL, J.M. ITO v. Saraswati Wire & Cable Industries ITA No. 2548/MUM/2023 20 March, 2024 Assessee by: None Revenue by: Manoj Kumar Singh ORDER *Sandeep Singh Karhail, J.M.* The present appeal has been filed by the Revenue challenging the impugned Order dated 20-5-2023, passed under section 250 of the Income Tax Act, 1961 ( the IT Act ) by the learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi ( learned CIT (A) ), for the assessment year 2011-12, which in turn arose from the penalty Order dated 3-1-2022 passed under section 271(1)(c) of the Act. 2. The only grievance of the Revenue is against the deletion of penalty levied under section 271(1)(c) of the Act. 3. During the hearing, no one appeared on behalf of the assessee nor was any application seeking adjournment filed. Therefore, we proceed to decide this appeal ex-parte qua the assessee after hearing the submissions of the learned Departmental Representative ( learned DR ) and the material available on record. 4. We have considered the submissions of the learned Departmental Representative and perused the material available on record. During the year under consideration, the assessee had shown purchases of Rs. 23,40,260 from various parties. Vide assessment order passed under section 143(3) of the Act, the assessing officer ( AO ), in the absence of sufficient material to prove the genuineness of the purchases, made the addition of 12.5% of the total purchases. Meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated separately. After considering the submissions of the assessee the assessing officer vide Order dated 3-1-2022 passed under section 271(1)(c) of the Act levied a penalty of Rs. 1,41,020. 5. We find that the learned Commissioner (Appeals), vide impugned order, by following the decision of the coordinate bench of the Tribunal in Mukesh Shaligram Sharda v. ITO, in ITAs No. 1907 & 1908/MUM/2021 : 2023 TaxPub(DT) 2817 (Mum-Trib), for the assessment year 2019-20, deleted the penalty levied by the assessing officer. The relevant findings of the learned Commissioner (Appeals) are as under:- Decision: 2.3 I have carefully considered the grounds of appeal, assessment order and submission of the appellant. In this case addition has been made on estimate basis on bogus purchases. Similar issue has came up before Income Tax Appellate Tribunal, Mumbai in the case of Mukesh Shaligram Sharda v. ITO, ITA No. 1907 & 1908/MUM/2021, for A.Y. 19-20, vide Order dated 22-2-2023 : 2023 TaxPub(DT) 2817 (Mum-Trib). Hon'ble Income Tax Appellate Tribunal has held as under. "3. The fact in brief are that during the course of assessment proceedings, the assessing officer had disallowed 100% of purchases made through three parties on the basis of the information received from the sales-tax department that those three parties were engaged in providing bills without supplying any good. However, the learned Commissioner (Appeals) has estimated the quantum addition to the extent of 12.5% of purchases. Thereafter, the assessing officer has levied penalty of Rs. 8,13,793 under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. The assessee filed appeal before the learned Commissioner (Appeals) against levying penalty. However, the learned Commissioner (Appeals) has dismissed the appeal the appeals of the assessee. 4. Heard both the sides and perused the materials on record. It is undisputed fact that impugned penalty was levied only on estimated addition. The assessing officer had made addition of entire bogus purchases, however, did not doubt the sales made against such purchases. We observe that the Tribunals in various decisions have held that where sales are not disputed, entire alleged bogus purchases cannot be disallowed and only the gross profit on the alleged purchases to be disallowed. After taking into consideration the various decisions of the Tribunal that no penalty under section 271(1)(c) is leviable on estimated additions and also after taking into consideration the decision of Hon'ble Rajasthan High Court in the case of CIT v. Krishi Tyre Retreading & Rubber Industries (2014) 360 ITR 580 (Raj) : 2014 TaxPub(DT) 0183 (Raj-HC); the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Sangrur Vanaspati Mills Ltd. (2008) 303 ITR 53 (P&H) : 2008 TaxPub(DT) 1670 (P&H-HC); and the decision of Hon'ble Gujarat High Court in the case of CIT v. Subhsh Trading Co. Ltd. (1996) 221 ITR 110 (Guj) : 1996 TaxPub(DT) 0591 (Guj-HC), we direct the assessing officer to delete the impugned penalty levied on estimated addition. Therefore, the appeal of the assessee is allowed. The facts in this case are similar. Respectfully following the order of jurisdictional Income Tax Appellate Tribunal, the penalty levied in this case is deleted in full. Other issues raised by the appellant are not disposed off. Ground of appeals are treated as disposed off accordingly. 6. Since the findings of the learned Commissioner (Appeals) are based on the decision of the coordinate bench of the Tribunal, we do not find any infirmity in the same. Accordingly, 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. 7. In the result, the appeal by the Revenue is dismissed Order pronounced in the open Court on 20-3-2024.

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Income Tax Act, 1961, Section 271(1)(c)

Penalty under section 271(1)(c)--Leviability--Addition on account of bogus purchases--Addition based on estimations

Conclusion: No penalty under section 271(1)(c) would be leviable on estimated additions.

AO, in absence of sufficient material to prove genuineness of purchases, made addition of 12.5% of total purchases. Thereafter, he levied penalty under section 271(1)(c). CIT (A) deleted the penalty. Held: CIT (A), by following the decision of Co-ordinate Bench of Tribunal in the case of Mukesh Shaligram Sharda v. ITO [ITAs No. 1907 & 1908/MUM/2021, dated 22-2-2023] : 2023 TaxPub(DT) 2817 (Mum-Trib), deleted the penalty holding that no penalty under section 271(1)(c) was leviable on estimated additions. Since finding of CIT (A) were based on decision of Co-ordinate Bench of Tribunal, there was infirmity in the same and hence, order of CIT (A) was upheld.

Decision: In assessee's favour

Referred: Mukesh Shaligram Sharda v. ITO [ITAs No. 1907 & 1908/MUM/2021, dated 22-2-2023] : 2023 TaxPub(DT) 2817 (Mum-Trib)

IN THE ITAT, MUMBAI BENCH

B.R. BASKARAN, A.M. & SANDEEP SINGH KARHAIL, J.M.

ITO v. Saraswati Wire & Cable Industries

ITA No. 2548/MUM/2023

20 March, 2024

Assessee by: None

Revenue by: Manoj Kumar Singh

ORDER

Sandeep Singh Karhail, J.M.

The present appeal has been filed by the Revenue challenging the impugned Order dated 20-5-2023, passed under section 250 of the Income Tax Act, 1961 ( the IT Act ) by the learned Commissioner (Appeals), National Faceless Appeal Centre, Delhi ( learned CIT (A) ), for the assessment year 2011-12, which in turn arose from the penalty Order dated 3-1-2022 passed under section 271(1)(c) of the Act.

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

3. During the hearing, no one appeared on behalf of the assessee nor was any application seeking adjournment filed. Therefore, we proceed to decide this appeal ex-parte qua the assessee after hearing the submissions of the learned Departmental Representative ( learned DR ) and the material available on record.

4. We have considered the submissions of the learned Departmental Representative and perused the material available on record. During the year under consideration, the assessee had shown purchases of Rs. 23,40,260 from various parties. Vide assessment order passed under section 143(3) of the Act, the assessing officer ( AO ), in the absence of sufficient material to prove the genuineness of the purchases, made the addition of 12.5% of the total purchases. Meanwhile, penalty proceedings under section 271(1)(c) of the Act were initiated separately. After considering the submissions of the assessee the assessing officer vide Order dated 3-1-2022 passed under section 271(1)(c) of the Act levied a penalty of Rs. 1,41,020.

5. We find that the learned Commissioner (Appeals), vide impugned order, by following the decision of the coordinate bench of the Tribunal in Mukesh Shaligram Sharda v. ITO, in ITAs No. 1907 & 1908/MUM/2021 : 2023 TaxPub(DT) 2817 (Mum-Trib), for the assessment year 2019-20, deleted the penalty levied by the assessing officer. The relevant findings of the learned Commissioner (Appeals) are as under:-

Decision:

2.3 I have carefully considered the grounds of appeal, assessment order and submission of the appellant. In this case addition has been made on estimate basis on bogus purchases. Similar issue has came up before Income Tax Appellate Tribunal, Mumbai in the case of Mukesh Shaligram Sharda v. ITO, ITA No. 1907 & 1908/MUM/2021, for A.Y. 19-20, vide Order dated 22-2-2023 : 2023 TaxPub(DT) 2817 (Mum-Trib). Hon'ble Income Tax Appellate Tribunal has held as under.

"3. The fact in brief are that during the course of assessment proceedings, the assessing officer had disallowed 100% of purchases made through three parties on the basis of the information received from the sales-tax department that those three parties were engaged in providing bills without supplying any good. However, the learned Commissioner (Appeals) has estimated the quantum addition to the extent of 12.5% of purchases. Thereafter, the assessing officer has levied penalty of Rs. 8,13,793 under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. The assessee filed appeal before the learned Commissioner (Appeals) against levying penalty. However, the learned Commissioner (Appeals) has dismissed the appeal the appeals of the assessee.

4. Heard both the sides and perused the materials on record. It is undisputed fact that impugned penalty was levied only on estimated addition. The assessing officer had made addition of entire bogus purchases, however, did not doubt the sales made against such purchases. We observe that the Tribunals in various decisions have held that where sales are not disputed, entire alleged bogus purchases cannot be disallowed and only the gross profit on the alleged purchases to be disallowed. After taking into consideration the various decisions of the Tribunal that no penalty under section 271(1)(c) is leviable on estimated additions and also after taking into consideration the decision of Hon'ble Rajasthan High Court in the case of CIT v. Krishi Tyre Retreading & Rubber Industries (2014) 360 ITR 580 (Raj) : 2014 TaxPub(DT) 0183 (Raj-HC); the decision of Hon'ble Punjab & Haryana High Court in the case of CIT v. Sangrur Vanaspati Mills Ltd. (2008) 303 ITR 53 (P&H) : 2008 TaxPub(DT) 1670 (P&H-HC); and the decision of Hon'ble Gujarat High Court in the case of CIT v. Subhsh Trading Co. Ltd. (1996) 221 ITR 110 (Guj) : 1996 TaxPub(DT) 0591 (Guj-HC), we direct the assessing officer to delete the impugned penalty levied on estimated addition. Therefore, the appeal of the assessee is allowed.

The facts in this case are similar. Respectfully following the order of jurisdictional Income Tax Appellate Tribunal, the penalty levied in this case is deleted in full. Other issues raised by the appellant are not disposed off. Ground of appeals are treated as disposed off accordingly.

6. Since the findings of the learned Commissioner (Appeals) are based on the decision of the coordinate bench of the Tribunal, we do not find any infirmity in the same. Accordingly, 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.

7. In the result, the appeal by the Revenue is dismissed

Order pronounced in the open Court on 20-3-2024.