M/S. METAL TRADERS , MUMBAI V. ITO-WARD 33(2)(3), MUMBAI

ITA 1139/MUM/2023

AI Insights

The case involves M/s. Metal Traders, who appealed against the penalty levied by the Income Tax Officer (ITO) under section 271(1)(c) for the Assessment Year 2011-12. The penalty was imposed following an assessment that added suppressed undisclosed profits estimated at 12.5% on alleged bogus purchases. The Commissioner of Income Tax (Appeals) (CIT(A)) later reduced this to 6%. The Tribunal found that since the additions were based on estimations, the penalty was not sustainable, referencing several High Court decisions that supported this view.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 126970 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-06-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 05-04-2023
• Other Referred Cases: ACIT vs. M/s. Colo Color Pvt. Ltd., ACIT vs. Golkunda Diamonds & Jewellery Ltd., M/s. Ramnarain And Company vs. ACIT, CIT vs. Krishi Tyre Retreading and Rubber Industries, CIT vs. Sangrur Vanaspati Mills Ltd., CIT vs. Subhash Trading Co. Ltd., CIT vs. Aero Traders Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 271(1)(c)

Judgement Text

आयकर य कर म ु ंबई ठ “ड ”, म ु ंबई ठ क , य यक य ए ं गगन गोय , ेख क र य के म% IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आ ं.1139/म ु ं/ 2023 ( न. .2011-12) ITA NO. 1139/MUM/2023(A.Y. 2011-12) M/s. Metal Traders, B/307, E/3, Highway Park, Thakur Complex, Kandivali East, Mumbai 400 101 PAN: AAGFM-3851-K ...... + /Appellant बन म Vs. ITO-WARD 33(2)(3), C-12, 6 th Floor, Pratyaksha Kar Bhavan, Bandra Kurla Complex, Bandra (East) Mumbai – 400 051. ..... , - /Respondent + . र / Appellant by : Ms. Dinkle Haria, Advocate , - . र /Respondent by : Ms. Mahita Nair, Sr. AR ु न ई क/ - / Date of hearing : 28/06/2023 0ो1 क/ - / Date of pronouncement : 28/06/2023 आदेश/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ in short ‘the CIT(A)’] dated 06/02/2023, for the Assessment Year 2011-12 confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 [ in short ‘the Act’]. 2 ITA NO. 1139/MUM/2023(A.Y. 2011-12) 2. Ms. Dinkle Haria appearing on behalf of the assessee submitted that assessment for assessment year 2011-12 in the case of assessee was reopened on the ground that the assessee has indulged in obtaining bogus purchase bills. The Assessing Officer vide assessment order dated 24/11/2016 passed u/s. 143(3) r.w.s. 147 of the Act made addition by estimating suppressed undisclosed profit of 12.5% on alleged bogus purchases. The Assessing Officer also initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income and concealment of income. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A) . The CIT(A) restricted the addition to 6% of the total alleged bogus purchases . The order of CIT(A) restricting addition to 6% was again on mere estimations. The Assessing Officer vide order dated 05/03/2019 levied penalty of Rs.75,151/- i.e. to the extent of 100% of tax sought to be evaded. The assessee carried the issue in appeal before the CIT(A). The appeal of the assessee was dismissed by the CIT(A) for non-prosecution. 2.1 The ld. Counsel for the assessee submitted at the outset that no penalty u/s. 271(1)(c) of the Act is sustainable where the addition has been made merely on estimations. In support of her submissions, she placed reliance on the following decisions: (i) ACIT vs. M/s. Colo Color Pvt. Ltd., ITA No.5390/Mum/2018, A.Y. 2011-12 decided on 31/07/2020. (ii) ACIT vs. Golkunda Diamonds & Jewellery Ltd., ITA No.5507/Mum/2019 A.Y.2009-10 decided 27/07/2021. (iii)M/s. Ramnarain And Company vs. ACIT, ITA No.347/Mum/2023, A.Y. 2010-11 decided on 19/05/2023. 3 ITA NO. 1139/MUM/2023(A.Y. 2011-12) 3. Per contra, Ms. Mahita Nair representing the Department submitted that the CIT(A) has upheld the findings of Assessing Officer that the assessee has indulged in obtaining bogus purchase bills from hawala dealers. Thus, it is a clear case of suppression of profits by way of furnishing inaccurate particulars of income and concealment. 4. We have heard the submissions made by both sides and have examined the orders of authorities below. We have considered the decisions on which ld. Counsel for the assessee has placed reliance. From perusal of the assessment order it is evident that addition on account of alleged bogus purchases has been made solely on estimations. The Assessing Officer has estimated suppression of profits on bogus purchases at 12.5%, in first appellate proceedings the CIT(A) restricted it to 6%. It is an accepted legal position that penalty u/s. 271(1)(c) of the Act can not be levied on estimated addition. This view has been upheld by different Hon’ble High Courts. Some of the decisions, wherein penalty u/s. 271(1)(c) of the Act levied on estimated additions has held to be unsustainable are as under:- (i) CIT vs. Krishi Tyre Retreading and Rubber Industries, 360 ITR 580(Raj); (ii) CIT vs. Sangrur Vanaspati Mills Ltd., 303 ITR 53 (P&H; (iii) CIT vs. Subhash Trading Co. Ltd., 221 ITR 110 (Guj); (iv) CIT vs. Aero Traders Pvt. Ltd., 322 ITR 316 (Delhi). The Co-ordinate Bench of the Tribunal in the case of M/s. Ramnarain And Company vs. ACIT (supra), ACIT vs. Golkunda Diamonds & Jewellery Ltd.(supra) and ACIT vs. M/s. Colo Color Pvt. Ltd. by placing reliance on the aforesaid decisions by the Hon’ble High Courts have held that no penalty can be initiated where the addition is made on estimations. 4 ITA NO. 1139/MUM/2023(A.Y. 2011-12) 5. Thus, in light of the fact of the case and the decision discussed above, we quash the impugned order and allow the appeal of assessee. Order pronounced in the open court on Wednesday the 28 th day of June, 2023. Sd/- Sd/- (GAGAN GOYAL) (VIKAS AWASTHY) ेख क र य/ACCOUNTANT MEMBER य यक य/JUDICIAL MEMBER म ु ंबई/ Mumbai, 2 न ंक/Dated 28/06/2023 Vm, Sr. PS(O/S) े Copy of the Order forwarded to : 1. +/The Appellant , 2. , - / The Respondent. 3. The PCIT 4.. 3 ग य , - न , आय. . ., म ु बंई/DR, ITAT, Mumbai 5. ग ड5 6 7 /Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar), ITAT, Mumbai