2021 (2) TMI 544 - AT - Income Tax

Penalty u/s 271(1)(c) - Estimation of income - quantum additions made on account of bogus purchases - HELD THAT - We find that the CIT(Appeals) has deleted the penalty on the basis of this fact when the profit was estimated then no penalty was leviable. CIT(A) has relied upon the Hon ble Allahabad High Court in the case of Naresh Chand Agrwal 2013 (6) TMI 68 - ALLAHABAD HIGH COURT and the decision in the case of DCIT Cir 4(2)(2) Vs. M/s. Manoharmanak Alloys Pvt. Ltd 2017 (1) TMI 1698 - ITAT MUMBAI , and the decision of Hon ble ITAT Delhi Bench in the case of Shruti Fastners Ltd. Vs. DCIT 2017 (4) TMI 1059 - ITAT DELHI , and ITAT Mumbai in the case of Rakeshkumar M. Gupta Vs. ITO 2017 (2) TMI 1472 - ITAT MUMBAI , Moreover, the Hon ble Gujarat High Court in the case of National Textiles Vs. CIT 2000 (10) TMI 19 - GUJARAT HIGH COURT , has held that the penalty is not leviable when the profit has been estimated on estimation basis. - Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 271(1)(c) of the Act for bogus purchases.
2. Whether penalty was correctly deleted by CIT(A).
3. Concealment of income or furnishing inaccurate particulars.
4. Appeal against CIT(A) order.

The Appellate Tribunal ITAT Mumbai dealt with an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals) -26, Mumbai regarding the deletion of a penalty under section 271(1)(c) of the Income Tax Act for bogus purchases for the assessment year 2010-11. The revenue contended that the penalty was deleted without considering the assessee's failure to establish the genuineness of the purchases. The Tribunal examined whether the CIT(A) was correct in deleting the penalty and held that when additions are made on estimation basis, no penalty is leviable for concealment of income or furnishing inaccurate particulars. The CIT(A) based the decision on various court precedents, including a case from the Allahabad High Court and decisions of the Hon'ble ITAT Mumbai and Delhi Bench. The Tribunal noted that the CIT(A) had judiciously and correctly decided the matter, upholding the deletion of the penalty. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order.

In this case, the primary issue was the penalty under section 271(1)(c) of the Income Tax Act related to bogus purchases. The revenue argued that the penalty was incorrectly deleted by the CIT(A) without considering the onus on the assessee to prove the genuineness of the purchases. However, the Tribunal held that when additions are made on estimation basis, as in this case, no penalty is leviable for concealment of income or furnishing inaccurate particulars. The CIT(A) relied on legal precedents to support the deletion of the penalty, emphasizing that the appellant had not concealed income or furnished inaccurate particulars. The Tribunal concurred with the CIT(A)'s decision, citing various court judgments, and dismissed the revenue's appeal.

The Tribunal analyzed whether the assessee concealed income or furnished inaccurate particulars, crucial for determining the penalty under section 271(1)(c) of the Act. The CIT(A) found that the appellant had not concealed income or furnished inaccurate particulars, as the purchases were duly recorded in the books of accounts. The Tribunal agreed with the CIT(A) that in cases where profits are estimated, penalty for concealment or inaccuracies is not applicable. The Tribunal referenced relevant court decisions to support this conclusion and upheld the CIT(A)'s order deleting the penalty. Consequently, the Tribunal dismissed the revenue's appeal, affirming the decision regarding concealment of income and inaccurate particulars.

The appeal before the Appellate Tribunal ITAT Mumbai centered on challenging the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Income Tax Act related to bogus purchases. The Tribunal examined the legal aspects surrounding the imposition of penalties for concealment of income or furnishing inaccurate particulars. Based on established legal principles and precedents, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that penalties are not leviable when profits are estimated. The Tribunal dismissed the revenue's appeal, affirming the correctness of the CIT(A)'s order in this regard.