2020 (11) TMI 638 - AT - Income Tax

Penalty u/s 271 (1) (c) - assessee had obtained bogus purchase bills from hawala dealers - reopening of assessment - CIT(A) has restricted the addition of 12.5% of the total amount of bogus purchases - HELD THAT - AO made addition of the total amount of bogus purchases. However, the Ld. CIT(A) restricted the addition to 12.5% of the questioned purchases, which was confirmed by the Tribunal in further appeal. The coordinate Bench has decided the identical issue in case of Sh. Ajay Loknath Lohia 2018 (10) TMI 724 - ITAT MUMBAI in favour of the assessee. Since the facts of the present case are similar to the facts of the cases relied upon by the Ld. counsel for the assessee and the issues involved are identical, we do not find any reason to take a different view in this case. Hence, we decide this issue in favour of the assessee. Accordingly, we set aside the impugned order passed by the Ld. CIT(A) and direct the AO to delete the penalty levied/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Challenge to penalty order u/s 271(1)(c) of the Income Tax Act, 1961 by the assessee.
2. Allegation of concealment of income/furnishing inaccurate particulars of income.
3. Natural justice concerns raised by the assessee.

Detailed Analysis:

Issue 1: Challenge to Penalty Order u/s 271(1)(c)
The appeal was filed against the penalty order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The assessee, engaged in construction and engineering, initially declared total income but faced issues regarding alleged bogus purchases. The Assessing Officer (AO) reopened the assessment, leading to a penalty of &8377; 18,98,380/- for inaccurate particulars of income. The CIT (A) confirmed this penalty, prompting the appeal to the Tribunal.

Issue 2: Allegation of Concealment of Income
The crux of the challenge lay in the contention that the penalty was unjustified as the addition made on an estimation basis did not amount to concealment of income or furnishing inaccurate particulars. The counsel argued that since the CIT (A) had sustained the addition on an estimation basis, the penalty should have been deleted. Citing relevant cases, the counsel emphasized that the addition based on estimation did not prove deliberate attempts to provide inaccurate income particulars, thus rendering the penalty invalid.

Issue 3: Natural Justice Concerns
The assessee raised concerns regarding natural justice, alleging that the CIT (A) did not provide adequate opportunity to be heard, leading to an order that was framed without due consideration of facts and submissions. This lack of proper hearing was argued to render the appellate order bad and illegal, breaching principles of natural justice.

Judgment Analysis:
The Tribunal analyzed the case in light of precedents where penalties were deleted when additions were made on estimation basis without concrete evidence of deliberate misinformation. Citing cases like Sh. Ajay Loknath Lohia vs. ITO and Sameer D. Punjabi, the Tribunal found that the addition based on estimation did not constitute concealment of income. Consequently, the Tribunal set aside the penalty, aligning with decisions favoring the assessee. As a result, the appeal was allowed for the assessment year 2011-2012, emphasizing that the addition on an estimation basis did not warrant a penalty for inaccurate income particulars.