MR. PRAHLAD G PRAJAPATI, MUMBAI V. ITO-19(2)(5), MUMBAI

ITA 783/MUM/2023

AI Insights

The case involves Mr. Prahlad G. Prajapati, who appealed against a penalty levied by the Income Tax Officer under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2011-12. The penalty was imposed following a reassessment that identified non-genuine purchases amounting to Rs.95,39,118, based on information from the sales tax department. The Assessing Officer estimated a profit of 12.5% on these purchases, which was later reduced to 6.5% by the CIT(A). The Tribunal, referencing decisions from the Bombay High Court and other ITAT decisions, concluded that penalties should not be levied on additions made on an estimated basis alone, leading to the allowance of the appeal and deletion of the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130198 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 13-03-2023
• Other Referred Cases: CIT Vs. Aarkey Saree Museum, CIT Vs. Yusuf Abdulah Patel, Etco Industries (P) Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 148; 271(1)(c); 143(3); 274

Judgement Text

P a g e | 1 ITA No.783/Mum/2023 Mr. Prahlad G. Prajapati Vs. The ITO-19(2)(5) IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No. 783/Mum/2023 (A.Y.2011-12) Mr. Prahlad G. Prajapati 4, 1 st Floor, Lahari Building, 5 th Khetwadi Mumbai – 400004 Vs. The Income Tax Officer- 19(2)(5), Room No. 210, 2 nd Floor, Matru Mandir, Tardeo Road, Maharashtra - 400007 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AHDPP4213A Appellant .. Respondent Appellant by : None Respondent by : Ujjwal Chavhan Date of Hearing 23.05.2023 Date of Pronouncement 29.05.2023 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assesse is directed against the order passed by the NFAC, Delhi dated 31.01.2023 for A.Y. 2011-12. 2. The solitary issue in the ground of appeal of the assessee is directed against the decision of ld. CIT(A) in deleting the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act to the amount of Rs.1,91,593/-. 3. The fact in brief is that the case of the assessee was reopened by issuing of notice u/s 148 of the Act on the basis of information received from the sale tax department that assessee has obtained accommodation bills of purchases from 9 parties as mentioned in the assessment order to the amount of Rs.95,39,118/-. Thereafter, the P a g e | 2 ITA No.783/Mum/2023 Mr. Prahlad G. Prajapati Vs. The ITO-19(2)(5) assessment u/s 143(3) r.w.s 147 of the Act was completed vide order dated 29.02.2016 by making addition of Rs.11,92,389/- being unexplained expenses on account of non-genuine purchases @ 12% of such total purchases of Rs.95,39,118/-. 4. The assessee filed the appeal before the ld. CIT(A). The CIT(A) has partly allowed the appeal of the assessee by restricting the disallowance of such purchases @ 6% of the alleged non-genuine purchases of Rs.95,39,118/- as against the disallowance made @ 12.5% of such purchases in the assessment order passed u/s 143(3) r.w.s 147 of the Act. 5. Thereafter vide penalty order u/s 271(1)(c) r.w.s 274 of the Act the A.O has levied penalty of Rs.1,91,593/- for furnishing inaccurate particulars of income. The ld. CIT(A) has dismissed the appeal of the assessee. 6. Heard the ld. D.R and perused the material on record. Without reiterating the facts as elaborated above the assessing officer has made estimated addition of profit at 12.5% of the alleged non-genuine purchases as per reassessment order made u/s 143(3) r.w.s 147 of the Act. The ld. CIT(A) has restricted the estimated profit to the extent of 6.5% of the non-genuine purchases by confirming the addition of Rs.6,20,042/-. 7. After perusal of the material on record it is observed that assessing officer has not fully established that assessee has concealed his income and made purchases from the grey market. We consider that determination of income of assessee on certain estimate was not sufficient to conclude that assessee had concealed his income. It is not appropriate to levy penalty merely because of addition made on the basis of estimated profit. We have also considered the decision of Hon’ble Bombay High Court and Tribunal in the case of CIT Vs. Aarkey P a g e | 3 ITA No.783/Mum/2023 Mr. Prahlad G. Prajapati Vs. The ITO-19(2)(5) Saree Museum (990) 53 taxman 416 (Bom) and the decision of Hon’ble Bombay High Court in the case of CIT Vs. Yusuf Abdulah Patel (1994) 75 taxman 614 and decision of ITAT Mumbai in the case of Etco Industries (P) Ltd. Vs. ACIT (2015) 61 taxman.com 470 (Mumbai) wherein held that no penalty should be levied on addition merely made on estimate basis. Therefore, we consider that the decision of ld. CIT(A) in sustaining the penalty on the basis of addition made on estimated profit is not justified. Therefore, we direct the AO to delete the impugned penalty accordingly, the appeal of the assesse is allowed. 8.. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 29.05.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 29.05.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.