2021 (6) TMI 1094 - AT - Income Tax

ITA upholds CIT(A)'s decision to delete penalty under section 271(1)(c) for bogus purchases.

The ITAT upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) related to the estimated addition for bogus purchases amounting to Rs. ... Penalty levied u/s. 271(1)(c) - addition on bogus purchases - addition sustained @8% of the bogus purchases - HELD THAT:- CIT-A correctly deleted the penalty with reference to bogus purchase addition at ₹ 3,83,388/-, as the addition was done on estimated basis. Tax effect in this case is below the limit fixed by CBDT for filing appeals before ITAT. Revenue has tried to make out a case that since the addition was made pursuant to information from sales tax department, this penalty appeal falls in the exception carved out in the CBDT circular regarding appeals arising out of additions made pursuant to information from outside agencies. We are of the opinion that this plea is not tenable inasmuch as once revenue accepts that penalty is levied on outside agency information, the penalty levied will have no legs to stand. Revenue appeal dismissed. Issues:Deletion of penalty u/s 271(1)(c) for estimated addition of bogus purchase of Rs. 3,53,388.Analysis:The judgment pertains to an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals) dated 04.09.2019, relating to the assessment year 2011-12. The primary issue in question is the deletion of penalty under section 271(1)(c) concerning an estimated addition for bogus purchases amounting to Rs. 3,53,388. The case involved the assessee filing its return of income, subsequent assessment, and the initiation of penalty proceedings by the Assessing Officer (AO) based on additions made during assessment, including bogus purchases, disallowances, and foreign education expenses.During the penalty proceedings, the AO concluded that the assessee had furnished inaccurate particulars leading to concealed income. Consequently, a minimum penalty of Rs. 7,22,182 under section 271(1)(c) was levied. Upon appeal, the CIT(A) considered the additions made during assessment and subsequent relief granted, particularly focusing on the bogus purchase addition. The CIT(A) referred to various ITAT decisions on similar cases and noted that the penalty was linked only to the estimated bogus purchase addition, leading to the deletion of the penalty.Upon further appeal by the revenue, the ITAT analyzed the facts and circumstances, emphasizing that the penalty was solely related to the bogus purchase addition of Rs. 3,83,388, which was sustained by the ITAT at 8% of the total bogus purchases. The ITAT found the CIT(A)'s decision reasonable and in line with the case specifics, ultimately upholding the deletion of the penalty. Additionally, the ITAT addressed the tax effect, highlighting that it was below the CBDT's appeal filing limit for ITAT.Moreover, the ITAT dismissed the revenue's argument regarding the exception in the CBDT circular for appeals arising from information provided by external agencies. The ITAT reasoned that once the revenue accepts that the penalty is based on such external information, the grounds for the penalty would be weakened. Therefore, considering the precedents and the discussion presented, the ITAT upheld the CIT(A)'s decision and ruled in favor of deleting the penalty, ultimately dismissing the revenue's appeal.