HITESH JAYANTILAL MODI (HUF),MUMBAI V. INCOME TAX OFFICER- WARD 32(1)(5), MUMBAI

ITA 3285/MUM/2024

AI Insights

The case involves an appeal by Hitesh Jayantilal Modi (HUF) against the order of the Commissioner of Income-tax - National Faceless Appeal Centre, Delhi, which confirmed a penalty levied by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10. The penalty was imposed following an addition made on an estimate basis regarding bogus purchases. The Tribunal referenced a similar case (M/s S4 Interior in ITA No. 4422/Mum/2009-10) and previous judgments, including one by the Hon'ble High Court of Bombay, which supported the view that no penalty can be imposed if the addition is made on an estimate basis without irrefutable evidence proving the claim as false.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32069 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Other Referred Cases: M/s S4 Interior in ITA No. 4422/Mum/2009-10, CIT Vs. Upendra V. Mithani (ITA (L) No. 1860 of 2009)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: MANOJ MUNDRA
• Keywords: Set aside; Bogus purchase; Bogus
• Section: 271(1)(c)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 3285/MUM/2024 Assessment Year: 2009-10 Hitesh Jayantilal Modi (HUF) B-302, Mahvideh, Near Municipal Garden, Chandavarkar Road, Borivali West, Mumbai-400092. Vs. Income-tax Officer- Ward 32(1)(5), Kautilya Bhavan, Mumbai. PAN NO. AABHH 3508 K Appellant Respondent Assessee by : Mr. Manoj Mundra Revenue by : Mr. Hemanshu Joshi, Sr. DR Date of Hearing : 09/12/2024 Date of pronouncement : 18/02/2025 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 26.10.2023 passed by the Ld. Commissioner of Income-tax – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, in relation to penalty u/s 271(1)(c) of the Income-tax Act, 1961 (in short ‘the Act’) levied by the Assessing Officer. 2. The grounds raised by the assessee are reproduced as under: 1. Under the facts and in law, the learned CIT(A) erred in confirming levying of penalty w/s 271(1(c) of the Act, 1961 of Rs. 4,61,734/ 2 1.1 Under the facts and in law, the learned CIT(A) erred in confirming that the appellant is guilty of furnishing inaccurate particulars of income liable for levy of penalty us 271(1)(c) of the Income Tax Act, 196 1.2 Under the facts and in law, the learned CIT(A) failed to appreciate the submissions made by the appellant and also the fact that, addition is made on estimate basis and no penalty u/s 271(1)(c) of the Act can be levied where addition is made on estimate 3. We have heard rival submissions of the parties and perused the relevant materials on record made addition in respect of bogus purchases on estimate basis @ 12.5% of the bogus purchases amount and according penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of the income of the assessee, the Assessing Officer levied penalty vide order dated 30.03.2019. On further appeal, the Ld. CI said penalty. Before us, the Ld. counsel for the assessee submitted that addition has been made on estimate basis and therefore, relying the decision of Coordinate Bench of Tribunal M/s S4 Interior in ITA No. 4422/Mum 2009-10, the penalty is liable to be cancelled. We find that in the Hitesh Jayantilal Modi (HUF) ITA No. 3285/MUM/2024 tax Act, 1961 (in short ‘the Act’) levied by the Assessing The grounds raised by the assessee are reproduced as under: 1. Under the facts and in law, the learned CIT(A) erred in confirming levying of penalty w/s 271(1(c) of the Income Tax Act, 1961 of Rs. 4,61,734/-. 2 1.1 Under the facts and in law, the learned CIT(A) erred in confirming that the appellant is guilty of furnishing inaccurate particulars of income liable for levy of penalty us 271(1)(c) of the Income Tax Act, 1961. 1.2 Under the facts and in law, the learned CIT(A) failed to appreciate the submissions made by the appellant and also the fact that, addition is made on estimate basis and no penalty u/s 271(1)(c) of the Act can be levied where addition is made basis. We have heard rival submissions of the parties and perused the relevant materials on record. In the case, the Assessing Officer made addition in respect of bogus purchases on estimate basis @ 12.5% of the bogus purchases amount and according penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars of the income. After consider he Assessing Officer levied penalty vide order dated 30.03.2019. On further appeal, the Ld. CIT(A) also sustained the said penalty. Before us, the Ld. counsel for the assessee submitted that addition has been made on estimate basis and therefore, of Coordinate Bench of Tribunal M/s S4 Interior in ITA No. 4422/Mum/2017 for assessment year 10, the penalty is liable to be cancelled. We find that in the Hitesh Jayantilal Modi (HUF) 2 ITA No. 3285/MUM/2024 tax Act, 1961 (in short ‘the Act’) levied by the Assessing The grounds raised by the assessee are reproduced as under: 1. Under the facts and in law, the learned CIT(A) erred in Income Tax 2 1.1 Under the facts and in law, the learned CIT(A) erred in confirming that the appellant is guilty of furnishing inaccurate particulars of income liable for levy of penalty us 271(1)(c) of the 1.2 Under the facts and in law, the learned CIT(A) failed to appreciate the submissions made by the appellant and also the fact that, addition is made on estimate basis and no penalty u/s 271(1)(c) of the Act can be levied where addition is made We have heard rival submissions of the parties and perused . In the case, the Assessing Officer made addition in respect of bogus purchases on estimate basis @ 12.5% of the bogus purchases amount and accordingly initiated the penalty proceedings u/s 271(1)(c) of the Act for furnishing fter considering submission he Assessing Officer levied penalty vide order dated T(A) also sustained the said penalty. Before us, the Ld. counsel for the assessee submitted that addition has been made on estimate basis and therefore, of Coordinate Bench of Tribunal in the case of for assessment year 10, the penalty is liable to be cancelled. We find that in the said case, the Co-ordinate Bench of the Tribunal has held that the Assessing Officer made addition on estimate basis merely in the nature of unproved disproved on the basis of irrefutable relevant finding of the Tribunal is reproduced as under: “7. We have further deliberated at length on the contentions advanced by the authorized representativ in the backdrop of the merits of the case. We find, that admittedly it is a case where the A.O had on an estimate basis made an addition of 12.5% of the value of the unproved purchases. Further, on a perusal of the orders of the low authorities, it emerges that the A.O had declined to accept the genuineness and veracity of the purchase transactions under consideration, for the reason, that the documentary evidence produced by the assessee to substantiate the same, were not found by him to his satisfaction. We are of the considered view, that the addition made by the A.O on an estimate basis is merely backed by an unproved claim of the assessee, and not a claim which was disproved to the hilt on the basis of irrefutable documentary e aforesaid facts, it can safely be concluded that though the unproved purchases would justify an addition in the hands of the assessee, however, no penalty under Sec. 271(1)(c) merely on the said basis could ha our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. (ITA (L) No. 1860 of 2009), dated 05.08.2009, wherein it was observed as under: \"The issue deletion of penalty under Section 271(1)(c) of the I.T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no pe can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false. The view taken by the Tribunal is a Hitesh Jayantilal Modi (HUF) ITA No. 3285/MUM/2024 ordinate Bench of the Tribunal has held that the Assessing Officer made addition on estimate basis in the nature of unproved claim and not a claim basis of irrefutable documentary evidence relevant finding of the Tribunal is reproduced as under: We have further deliberated at length on the contentions advanced by the authorized representatives of both the parties, in the backdrop of the merits of the case. We find, that admittedly it is a case where the A.O had on an estimate basis made an addition of 12.5% of the value of the unproved purchases. Further, on a perusal of the orders of the low authorities, it emerges that the A.O had declined to accept the genuineness and veracity of the purchase transactions under consideration, for the reason, that the documentary evidence produced by the assessee to substantiate the same, were not him to his satisfaction. We are of the considered view, that the addition made by the A.O on an estimate basis is merely backed by an unproved claim of the assessee, and not a claim which was disproved to the hilt on the basis of irrefutable documentary evidence by the revenue. In the backdrop of the aforesaid facts, it can safely be concluded that though the unproved purchases would justify an addition in the hands of the assessee, however, no penalty under Sec. 271(1)(c) merely on the said basis could have been validly imposed. We find that our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Upendra V. Mithani (ITA (L) No. 1860 of 2009), dated 05.08.2009, wherein it was observed as under:- \"The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I.T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no pe can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false. The view taken by the Tribunal is a Hitesh Jayantilal Modi (HUF) 3 ITA No. 3285/MUM/2024 ordinate Bench of the Tribunal has held that the Assessing Officer made addition on estimate basis which was claim and not a claim which was documentary evidences. The relevant finding of the Tribunal is reproduced as under: We have further deliberated at length on the contentions es of both the parties, in the backdrop of the merits of the case. We find, that admittedly it is a case where the A.O had on an estimate basis made an addition of 12.5% of the value of the unproved purchases. Further, on a perusal of the orders of the lower authorities, it emerges that the A.O had declined to accept the genuineness and veracity of the purchase transactions under consideration, for the reason, that the documentary evidence produced by the assessee to substantiate the same, were not him to his satisfaction. We are of the considered view, that the addition made by the A.O on an estimate basis is merely backed by an unproved claim of the assessee, and not a claim which was disproved to the hilt on the basis of irrefutable vidence by the revenue. In the backdrop of the aforesaid facts, it can safely be concluded that though the unproved purchases would justify an addition in the hands of the assessee, however, no penalty under Sec. 271(1)(c) merely ve been validly imposed. We find that our aforesaid view is fortified by the judgment of the Hon'ble Upendra V. Mithani (ITA (L) No. 1860 of 2009), dated 05.08.2009, wherein it was involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I.T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, ie. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false. The view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. same is dismissed in l to costs.\" We are of the considered view, that the assessee in the case before us had failed to substantiate the genuineness and veracity of the purchases claimed to have been made from the aforementioned parties, by placing on reco evidence as was called for by the A.O. However, we cannot also remain oblivious of the fact that as the assessee had evidenced the purchase transactions under consideration, by placing on record certain documents viz. invoices, ledger ac parties, bank statements etc, the authenticity of which had neither been dislodged or disproved by the lower authorities, therefore, the same in itself takes the case of the assessee beyond the realm of the penal provisions contemplated under Section 271(1)(c). We further find that the Hon'ble Supreme Court by dismissing the revenue in CIT (SLP) (Civil) (2018) 97 Taxman.com 279 (SC), had recently upheld the order aforesaid case, the High Court had observed that where a claim of expenditure is neither found inaccurate, nor could be viewed as concealment of income on the part of the assessee, then merely because the sai to the revenue, that by itself would not attract penalty under Sec. 271(1)(c). Now, in the case before us, as the revenue had failed to disprove to the hilt on the basis of clinching documentary evidence, the authenti assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases, no penalty under Sec. validly imposed on 3.1 In the instant case, the Assessing Officer has estimated the profit in respect of bogus purchases without brining on any clinching material to establish furnishing of inaccurate particulars on the part of the assessee. Therefore, following the decision of the Co-ordinate Bench of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) and cancel the penalty levied by the Assessing Hitesh Jayantilal Modi (HUF) ITA No. 3285/MUM/2024 reasonable and possible view. The appeal is without any substance. same is dismissed in limine with no order as to costs.\" We are of the considered view, that the assessee in the case before us had failed to substantiate the genuineness and veracity of the purchases claimed to have been made from the aforementioned parties, by placing on record the documentary evidence as was called for by the A.O. However, we cannot also remain oblivious of the fact that as the assessee had evidenced the purchase transactions under consideration, by placing on record certain documents viz. invoices, ledger accounts of parties, bank statements etc, the authenticity of which had neither been dislodged or disproved by the lower authorities, therefore, the same in itself takes the case of the assessee beyond the realm of the penal provisions contemplated under tion 271(1)(c). We further find that the Hon'ble Supreme Court by dismissing the 'Special leave Petition' (SLP) of the revenue in CIT-2 Lucknow Vs. U.P State Bridge Corporation Ltd. (SLP) (Civil) (2018) 97 Taxman.com 279 (SC), had recently upheld the order of the Hon'ble High Court of Allahabad. In the aforesaid case, the High Court had observed that where a claim of expenditure is neither found inaccurate, nor could be viewed concealment of income on the part of the assessee, then merely because the said claim was not accepted or acceptable to the revenue, that by itself would not attract penalty under Sec. 271(1)(c). Now, in the case before us, as the revenue had failed to disprove to the hilt on the basis of clinching documentary evidence, the authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases, no penalty under Sec. 271(1)(c) could have been validly imposed on the assessee.” ant case, the Assessing Officer has estimated the profit in respect of bogus purchases without brining on any clinching material to establish furnishing of inaccurate particulars on the part of the assessee. Therefore, following the decision of the nate Bench of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) and cancel the penalty levied by the Assessing Hitesh Jayantilal Modi (HUF) 4 ITA No. 3285/MUM/2024 reasonable and possible view. The appeal is without any imine with no order as We are of the considered view, that the assessee in the case before us had failed to substantiate the genuineness and veracity of the purchases claimed to have been made from the rd the documentary evidence as was called for by the A.O. However, we cannot also remain oblivious of the fact that as the assessee had evidenced the purchase transactions under consideration, by placing on record certain documents viz. invoices, ledger accounts of parties, bank statements etc, the authenticity of which had neither been dislodged or disproved by the lower authorities, therefore, the same in itself takes the case of the assessee beyond the realm of the penal provisions contemplated under tion 271(1)(c). We further find that the Hon'ble Supreme 'Special leave Petition' (SLP) of the 2 Lucknow Vs. U.P State Bridge Corporation Ltd. (SLP) (Civil) (2018) 97 Taxman.com 279 (SC), had recently of the Hon'ble High Court of Allahabad. In the aforesaid case, the High Court had observed that where a claim of expenditure is neither found inaccurate, nor could be viewed concealment of income on the part of the assessee, then d claim was not accepted or acceptable to the revenue, that by itself would not attract penalty under Sec. 271(1)(c). Now, in the case before us, as the revenue had failed to disprove to the hilt on the basis of clinching city of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of 271(1)(c) could have been ant case, the Assessing Officer has estimated the profit in respect of bogus purchases without brining on any clinching material to establish furnishing of inaccurate particulars on the part of the assessee. Therefore, following the decision of the nate Bench of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) and cancel the penalty levied by the Assessing Officer. The grounds of appeal of the assessee are accordingly allowed. 4. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 18/02/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Hitesh Jayantilal Modi (HUF) ITA No. 3285/MUM/2024 Officer. The grounds of appeal of the assessee are accordingly In the result, the appeal of the assessee is allowed. nounced in the open Court on 18/02/2025. Sd/- Sd/ RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Hitesh Jayantilal Modi (HUF) 5 ITA No. 3285/MUM/2024 Officer. The grounds of appeal of the assessee are accordingly In the result, the appeal of the assessee is allowed. /02/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "