2021 (1) TMI 1000 - AT - Income Tax

Revenue's Appeal Dismissed: Penalty for Alleged Bogus Purchases Deleted

The Appellate Tribunal ITAT Mumbai dismissed the revenue's appeal against the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) of ... Penalty u/s. 271(1)(c) - estimation of income - bogus purchases - CIT(A) has sustained the addition at 12.5% of the bogus purchases - HELD THAT:- Penalty u/s. 271(1)(c) cannot be levied when the income has been estimated. The Ld. DR could not controvert the observations of the Ld. CIT(A) with any cogent evidence except relying on the A.O's order. Accordingly, we are not inclined to interfere with the order of the Ld. CIT(A) who relied on the judicial decisions and passed a reasoned order in directing the assessing officer to delete the penalty. See HARIGOPAL SINGH VERSUS COMMISSIONER OF INCOME-TAX. [2002 (8) TMI 65 - PUNJAB AND HARYANA HIGH COURT] - Grounds of appeal raised by the revenue are dismissed. Issues Involved:Appeal against order u/s. 271(1)(c) of the Income Tax Act, 1961 - Penalty imposition based on alleged bogus purchases - CIT(A) deleting the penalty - Revenue's appeal against CIT(A)'s decision.Analysis:1. The case involves an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals) under section 271(1)(c) of the Income Tax Act, 1961, regarding alleged bogus purchases made by the assessee. The assessment was reopened due to information received indicating possible tax evasion through bogus purchase bills.2. The Assessing Officer (A.O.) made additions to the income based on the alleged bogus purchases, leading to a revised total income. The CIT(A) partially allowed the appeal, reducing the addition to 12.5% of the disputed amount. Subsequently, penalty proceedings were initiated by the A.O. under section 271(1)(c) for furnishing inaccurate particulars, resulting in a penalty imposition.3. The CIT(A) directed the A.O. to delete the penalty after considering the submissions of the assessee and relying on a decision of the Hon'ble High Court of Punjab and Haryana. The revenue filed an appeal challenging the CIT(A)'s decision to delete the penalty.4. During the hearing, the revenue contended that the CIT(A) erred in deleting the penalty despite the assessee's claim of bogus expenditure and the reopening of assessment based on external information. The revenue sought to set aside the CIT(A)'s order and allow the appeal.5. The Tribunal, after considering the submissions and relevant legal precedents, found that the penalty under section 271(1)(c) cannot be sustained when income has been estimated. Relying on the decision in CIT Vs. Manjunatha Cotton & Ginning Factory, the Tribunal dismissed the revenue's appeal, emphasizing that penalty imposition requires specific conditions and clear grounds, which were not met in this case.6. The Tribunal affirmed that the penalty cannot be levied solely on estimated income without concrete evidence of concealment or furnishing of inaccurate particulars. The decision was supported by legal principles emphasizing the necessity of clear directions for penalty initiation and the absence of automatic penalty imposition even if tax liability is admitted.7. Ultimately, the Tribunal upheld the CIT(A)'s decision to delete the penalty, dismissing the revenue's appeal and emphasizing the importance of substantiated grounds for penalty imposition under section 271(1)(c) of the Income Tax Act, 1961.Judgment Summary:The Appellate Tribunal ITAT Mumbai dismissed the revenue's appeal against the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, regarding alleged bogus purchases. The Tribunal emphasized the necessity of concrete evidence and clear grounds for penalty imposition, supporting the CIT(A)'s reasoned decision based on legal principles and judicial precedents.