INCOME TAX OFFICER, BANDRA KURLA COMPLEX V. RAJASTHAN METAL SYNDICATE, MUMBAI

ITA 2636/MUM/2024

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the decision of the CIT(A) which had deleted the penalty imposed on Rajasthan Metal Syndicate for the Assessment Years 2010-11 and 2011-12. The penalty was originally levied by the Assessing Officer (A.O.) for alleged concealment of income, based on estimated additions made to the assessee's income from bogus purchase entries. The CIT(A) found that the penalty was not sustainable as the additions were made on an estimated basis, not on the basis of 100% bogus purchases. The Tribunal upheld the CIT(A)'s decision, agreeing that the penalty on an estimated addition was not justifiable.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 25575 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-09-2024
• Assessment Year: misc
• Appeal Filed On: 09-05-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAHITA NAIR
• Keywords: Bogus purchase; Accommodation entries; Bogus
• Section: 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 2637/Mum/2024 (Assessment Year:2010-11) ITA No. 2636/Mum/2024 (Assessment Year: 2011-12) ITO 436 Kautaliya Bhavan, Bandra Kurla Complex, Mumbai-400 051 Vs. Rajasthan Metal Syndicate Shop No. 12, Govind Bhavan, S. V. Road, Chicholi, Hanuman Temple Malad (W), Mumbai-400 064 PAN/GIR No.AAAFR 1088 F (Assessee) : (Respondent) Assessee by : None Respondent by : Smt. Mahita Nair Date of Hearing : 11.09.2024 Date of Pronouncement : 28.10.2024 O R D E R Per Kavitha Rajagopal, J M: These appeals have been filed by the Revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2011–12 2. As there was no representation on behalf of the assessee, we hereby dispose of this appeal by hearing the learned Departmental Representative ('ld.DR' for short) and on perusal of the materials available on record. 3. As the facts are identical in both these appeals, we hear by dispose of these appeals by a consolidated order by taking ITA No. 2637/Mum/2024 as a lead case. 2 ITA No. 2637& 2636/Mum/2024 (A.Y. 2010-11& 2011-12) ITO vs. Rajasthan Metal Syndicate ITA No. 2637/Mum/2024 3. The Revenue has challenged these appeals on the ground that the ld. CIT(A) has erred in deleting the penalty levied u/s. 271(1)(c) of the Act on the ground that penalty on an addition made on estimate basis cannot be sustained. 4. The brief facts are that the assessee is engaged in the business of dealers and stockiest of ferrous and non-ferrous metals and had filed its return of income dated 26.09.2010, declaring total income at ₹1,30,520. The assessee’s case was reopened vide notice u/s.148 dated 26.09.2010 for the reason that based on the information from sales tax department and DGIT (Investigation), Mumbai that the assessee was beneficiary of accommodation entry by way of bogus purchase bills availed from accommodation entry providers to the tune of ₹57,59,529. 5. The ld. learned Assessing Officer ('ld. A.O.' for short) passed the assessment order u/s.143(3) r.w.s. 147 of the Act dated 14.03.2016, where the total income was determined at Rs.8,50,470 after making an addition/disallowance on the alleged bogus purchase amounting to ₹7,19,941 being 12.50 % of the said bogus purchase. The ld. A.O. initiated penalty proceeding u/s. 271(1)(c) of the Act for concealment of income and levied penalty of ₹2,22,463 being 100% of the tax sought to be evaded. 6. Aggrieved the assessee was an appeal before the first appellate authority, who vide order dated 20.02.2024, deleted the impugned penalty by holding that addition made on estimate basis cannot be held to be concealment of income. 7. The Revenue is an appeal before us challenging the order of the ld. CIT(A). 3 ITA No. 2637& 2636/Mum/2024 (A.Y. 2010-11& 2011-12) ITO vs. Rajasthan Metal Syndicate 8. We have heard the learned Departmental Representative (ld. DR for short) and perused the materials available on record. It is observed that the ld. A.O. had made an addition on the bogus purchases by gross profit at the rate 12.50% which was upheld by the ld. CIT(A) and restricted to 8%, by the tribunal in an appeal preferred by the assessee. The ld. CIT(A) has deleted the impugned penalty by holding that penalty levied on an addition made on estimate basis cannot be sustained. There is no iota of doubt that the addition in the case of the assessee was made on the estimation of the profit element embedded in such accommodation entries and not on 100% bogus purchases made by the assessee. 9. We, therefore, are of the considered view that no penalty can be levied on an addition which is made on estimated basis. Hence, we find no infirmity in the order of the ld. CIT(A) in deleting the penalty levied by the ld. A.O. The grounds of appeal raised by the Revenue are hereby dismissed. ITA No. 2636/Mum/2024 10. The findings applied in ITA No.2637/Mum/2024 will apply mutatis mutandis to this appeal also. 11. In the result, both the appeals filed by the Revenue are dismissed. Order pronounced in the open court on 28.10.2024 Sd/- Sd/- (O P Kant) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated :28.10.2024 Roshani, Sr. PS 4 ITA No. 2637& 2636/Mum/2024 (A.Y. 2010-11& 2011-12) ITO vs. Rajasthan Metal Syndicate Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "