2020 (12) TMI 968 - AT - Income Tax

Estimation of income - bogus purchases - CIT-A restricted the disallowance @12.5% - HELD THAT - CIT(A) considered the factual aspects and dealt on the provisions of the Sales Tax Act and relied on the decision of Hon ble Tribunal in assessee s own case and partly allowed the appeal. The Ld. DR could not controvert the findings of the CIT(A) with any cogent material or new information and relied on the order of the Assessing officer. We do not find infirmity in the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue. Penalty u/s 271(1)(c) - CIT(A) has estimated the income at 12.5% of the bogus purchases and the addition was accepted by the assessee - HELD THAT - We are of the opinion that, when the addition is sustained on estimation/ adhoc basis, no penalty u/s 271(1)(c) of the Act can be levied. We find that the LdCIT(A) relied on the Coordinate Bench of Hon ble tribunal decisions and passed a reasoned order in directing the Assessing Officer to delete the penalty. Accordingly, we are not inclined to interfere with the order of the Ld CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue.

Summary

Issues:
- Appeals filed by Revenue against separate orders of Commissioner of Income Tax (Appeals)
- Clubbing of appeals due to interlinked issues
- Disallowance of purchases from non-existent vendors
- Failure to substantiate claims of expenses
- Disallowance of 12.5% of bogus purchases
- Discrepancies in purchases from non-existent vendors
- Penalty levied under section 271(1)(c) of the Act

Analysis:
- The appeals were filed by the Revenue against separate orders of the Commissioner of Income Tax (Appeals) concerning the same assessee, leading to the clubbing of appeals due to interlinked issues. The main contention revolved around the disallowance of purchases from non-existent vendors and the failure of the assessee to substantiate claims of expenses related to these purchases. The Revenue argued for the disallowance of the entire unverifiable purchases, emphasizing the onus on the assessee to justify expenses. However, the CIT(A) restricted the disallowance to 12.5% of the bogus purchases based on judicial precedents and the assessee's own case for a different assessment year.

- The case involved discrepancies in purchases from non-existent vendors, where the assessee obtained bogus purchase bills from entry operators, leading to suspicion of inflated purchases. The Assessing Officer (A.O.) made a 100% addition of bogus purchases due to non-cooperation from the assessee in producing parties and relevant documents. The CIT(A) partially allowed the appeal, restricting the disallowance to 12.5% of the unproved purchases based on the assessee's engagement in the grey market for purchases, similar to previous judgments.

- In the penalty appeal under section 271(1)(c) of the Act for a different assessment year, the CIT(A) deleted the penalty levied by the A.O. based on the sustained addition of 12.5% of bogus purchases. The Tribunal upheld the CIT(A)'s decision, stating that when additions are made on estimation basis, penalty under section 271(1)(c) cannot be levied. The Tribunal found the CIT(A)'s order reasoned and in line with previous tribunal decisions, leading to the dismissal of the revenue's appeals in both instances.

- The Tribunal dismissed the revenue's appeals in both cases, upholding the CIT(A)'s decisions regarding the disallowance of 12.5% of bogus purchases and the deletion of penalty under section 271(1)(c) based on estimation basis. The judgments were pronounced on 20/11/2020 by the Tribunal.