2021 (5) TMI 296 - AT - Income Tax

Tribunal upholds CIT(A) decision deleting penalty under Income Tax Act

The Tribunal upheld the CIT(A)'s decision to delete a penalty under section 271(1)(c) of the Income Tax Act imposed by the AO for alleged bogus purchases. ... Penalty u/s. 271(1)(c) - Bogus purchases - As onus was on the assessee to establish the genuineness of such purchases by producing such parties before the Assessing Officer and the assessee failed to discharge his onus - CIT-A deleted the penalty - HELD THAT:- CIT(A) has decided the matter of controversy on the basis of decision in the case of Naresh Chand Agarwal [2013 (6) TMI 68 - ALLAHABAD HIGH COURT] and M/s. Manohar Manak Alloys P. Ltd. [2017 (1) TMI 1698 - ITAT MUMBAI] and M/s. Yashraj Films Pvt. Ltd. [2015 (7) TMI 1363 - ITAT MUMBAI] and Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Moreover, the Hon’ble Gujarat High Court in the case of National Textiles [2000 (10) TMI 19 - GUJARAT HIGH COURT] has held that the penalty is not leviable when the profit was added on estimation basis. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(Appeals) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with - Decided against revenue. Issues:1. Whether the CIT(A) was correct in deleting the penalty under section 271(1)(c) of the Income Tax Act for alleged bogus purchasesRs.2. Whether the AO's estimation of income justifies the penalty under section 271(1)(c)Rs.3. Whether the assessee furnished inaccurate particulars of income by resorting to bogus purchasesRs.4. Whether the CIT(A) decision should be reversed and that of the Assessing Officer restoredRs.Issue 1:The revenue appealed against the deletion of a penalty of Rs. 43,922 under section 271(1)(c) by the CIT(A) for alleged bogus purchases. The AO added Rs. 1,46,405 to the total income, leading to the penalty. The CIT(A) found that the purchases were genuine, supported by valid documents, and not concealed or inaccurate. The AO estimated profit on alleged bogus purchases, but the appellant's books showed the purchases, though the party couldn't be produced. Citing case laws, the CIT(A) concluded that where additions are made on estimation, no penalty is leviable for concealment or furnishing inaccurate particulars of income. The CIT(A) relied on various precedents and deleted the penalty.Issue 2:The AO's estimation of income led to the penalty under section 271(1)(c). However, the CIT(A) found that the appellant's purchases were duly recorded but couldn't produce the party. Citing relevant case laws, the CIT(A) concluded that penalties are not leviable when additions are made on an estimation basis. The CIT(A) dismissed the penalty based on these grounds, indicating that the AO's estimation did not justify the penalty under section 271(1)(c).Issue 3:The question of whether the assessee furnished inaccurate particulars of income by resorting to bogus purchases was examined. The CIT(A) found that the appellant did not conceal particulars of income or furnish inaccurate details, as the purchases were not conclusively proven to be bogus. The CIT(A) emphasized that penalties are not applicable when income is estimated, as per various judicial decisions. The CIT(A) concluded that the appellant did not furnish inaccurate particulars of income, leading to the deletion of the penalty.Issue 4:The revenue sought to reverse the CIT(A)'s decision and restore that of the Assessing Officer. However, after considering the facts, case laws, and precedents, the Tribunal dismissed the revenue's appeal. The Tribunal found that the CIT(A) had judiciously and correctly decided the matter, based on legal principles and precedents. Consequently, the appeal filed by the revenue was dismissed, upholding the CIT(A)'s decision.This comprehensive analysis of the judgment addresses the issues raised, the arguments presented, and the final decision rendered by the Tribunal.