M/S MANISHA CONSTRUCTION COMPNAY, MUMBAI V. ASST. CIT, CIRCLE-26 (1), MUMBAI

ITA 2569/MUM/2022

AI Insights

The case involves M/s. Manisha Construction Company appealing against a penalty levied by the AO under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2009-10. The penalty was imposed following the AO's addition of non-genuine bogus purchases to the company's income, based on information from the DGIT (Inv.), Mumbai. The CIT (A) upheld the penalty, which was contested in the Tribunal. The Tribunal referenced a similar case for the assessment year 2011-12, where it was held that no concealment penalty can be levied on an estimated addition. Consequently, the Tribunal allowed the appeal, directing the deletion of the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123374 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-01-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 06-10-2022
• Other Referred Cases: ITA No. 2570/Mum/2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ITA No. 2569/Mum/2022 (A.Y.2009-10) M/s. Manisha Construction Company 10, Chartered House, Ground Floor, Dr. C. H. Street, Near Dolours Church, Mumbai-400 002 PAN: AABFM4710G ...... Appellant Vs. ACIT, Circle-26 (1), 408, Aayakar Bhavan, M. K. Road Mumbai-400 020 ..... Respondent Appellant by : None Respondent by : Smt. Mahita Nair, Sr. AR, CIT Date of hearing : 18/01/2023 Date of pronouncement : 21/03/2023 ORDER PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi (for short “NFAC”) dated 26.08.2022 u/s. 271 (1) (c) of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2009-10. The assessee has raised the following grounds of appeal: 2 ITA No. 2569/MUM/2022 M/S. MANISHA CONSTRUCTION COMPANY “1. On the facts and in the circumstances of the case and in law the Hon’ble CIT (A) erred in upholding the penalty levied u/s. 271(1) (c) of the IT Act of Rs. 40, 000/- by the Ld. AO and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and Rules made there under. 2. Your appellant craves leave to add to, amend alter or delete any of the above grounds of appeal on or before the date of hearing.” 2. Brief facts of the case are that assessee partnership firm filed its return of income on 29.09.2009 declaring total income of Rs. 66,35,974/-. Case of the assessee was assessed u/s. 143(3) on 19.12.2011 at Rs. 94, 84,500/-. Thereafter, on the basis of information received from the office of DGIT (Inv.), Mumbai that the assessee made bogus purchases from hawala dealers listed on the website of Sales Tax Department, a notice u/s. 148 of the Act for reopening of the case was issued vide dated 31.03.2013. 3. Assessee vide letter dated 30.04.2013 submitted that the return originally filed on 29.09.2009 may be treated as filed in response to notice u/s. 148 of the Act. AO was not satisfied with the submissions of the assessee and purchases made by the parties in the list of MVAT as hawala dealer added back to the income of the assessee as non-genuine bogus purchases. Aggrieved with this addition, assessee filed an appeal before the Ld. CIT (A) and Ld. CIT (A) reduced the addition from 100% to 12.5% of alleged bogus purchase amounting to Rs. 1, 17,688/- on adhoc basis. Thereafter, AO passed an order of penalty u/s.271 (1) (c) of the Act keeping in view the figure of Rs. 1,17,688/- for the purposes of tax sought to be evaded. 4. Aggrieved with this order of penalty, assessee preferred an appeal before the Ld. CIT (A). In his order, Ld. CIT (A) appeal also confirmed the order of AO, then, in turn assessee preferred an appeal before us. We have gone through the order of AO (both assessment order as well as penalty order), order of Ld. CIT (A) (both against assessment order as well as penalty order) and submissions of the assessee along with case laws relied upon. 5. We observed that in assessee’s own case for A. Y. 2011-12 Coordinate Bench on the similar issue vide ITA No. 2570/Mum/2022 held as under: 3 ITA No. 2569/MUM/2022 M/S. MANISHA CONSTRUCTION COMPANY “We have heard the Id. DR and perused the materials available on record. We find that the assessee had made some purchases from some tainted parties and the Id. AO had resorted to make disallow the entire purchases made from such tainted parties in the sum of Rs 9,78,780/- in the assessment. The Id. CIT(A) in quantum proceedings observed that since the sales made out of disputed purchases had not been doubted by the revenue, only the profit element embedded in the value of disputed purchases could be brought to tax. Accordingly, the Id. CIT (A) estimated such profit percentage to be at 12.5% and directed the Id. AO to re-determine the income of the assessee accordingly. Pursuant to this, the Id. AO levied penalty u/s 271(1)(c) of the Act in the sum of Rs 37,805/- on the sustained addition made on account of bogus purchases on an estimated basis. The Id. CIT (A) upheld the levy of penalty despite the fact that the addition has been ultimately sustained only on an estimated basis by estimating the profit percentage embedded in the disputed purchases. The law is now very well settled that there cannot be any concealment penalty on an estimated addition. Hence we have no hesitation in directing the Id. AO to delete the penalty in the sum of Rs 37,805/- in the instant case. Accordingly, the ground raised by the assessee is allowed.” 6. As the facts emanating out of assessment order, order of Ld. CIT (A) and penalty order are similar to assessment year 2011-12, respectfully following the findings of Coordinate Bench. We are of the considered opinion that penalty levied is not sustainable as the addition was made on estimated basis and there is a consistent view of all the judicial forums that there cannot be any concealment penalty on and estimated addition. In view of this appeal of the assessee is allowed and AO is directed to delete the penalty order. 7. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21 st day of March, 2023. Sd/- Sd/- (AMIT SHUKLA) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 21/03/2023 Mahesh R. Sonavane 4 ITA No. 2569/MUM/2022 M/S. MANISHA CONSTRUCTION COMPANY Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकर आयुक्त CIT 4. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्ड फ इल/Guard file. BY ORDER, //True Copy// (Dy. /Asstt. Registrar) ITAT, Mumbai