TaxTMI 
TaxTMI 
2021 (1) TMI 41
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....nd other types of engineering goods under the name and style M/s S.P. Enterprises, filed its return of income for the assessment year under consideration declaring total income at Rs. 9,23,072/-. Subsequently, the assessment was reopened on the basis of information received from the Sales Tax Department through Directorate General of Income Tax (DGIT) (Investigation), Mumbai to the effect that the assessee had obtained bogus entries for Rs. 13,83,676/- from five bogus entities which used to provide accommodation entries without supplying goods. Accordingly, the AO made addition of the said amount to the income of the assessee and passed assessment order u/s 143 (3) r.w.s. 147 of the Act. The assessee challenged the assessment order before the Ld. CIT (A). Ld. CIT (A) after hearing the assessee restricted the addition to 12.5% of the alleged bogus purchases. Aggrieved by the impugned order passed by the Ld. CIT (A), the revenue is in appeal before this Tribunal. 3. The revenue has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in direc....
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....owing the ratio laid down by the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra). The concluding paras of the Ld. CIT (A) read as under:- "6.1 Ground No. 1 to 4 of the appeal are against addition of Rs. 13,83,676/- being non-genuine purchases. As per the investigations carried out by the Sales Tax Authorities, the aforementioned party was found to be involved in giving accommodation entries only without actually supplying the goods. The logical inference is that the purchases made by the appellant would also be in the nature of accommodation entries only. To verify the same, the AO had made enquiries by issuing notices u/ 133 (6) which were returned unserved by the postal authorities. This party was found to be non existent at the address given by the appellant. The appellant also failed to provide the latest address of the party. During the scrutiny assessment the appellant furnished details of purchases and corresponding sales. However, the appellant could not produce the party before the AO inspite of opportunity being given. The appellant also failed to produce delivery challans or transportation details. The onus of proving the genuineness of such ....
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....o laid down by the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (supra), when the total sale is accepted by the Assessing Officer then entire purchases cannot be added to the income of the assessee. Therefore, only the profit element embedded in such purchases could be added to the income of the assessee. Since, the Ld. CIT (A) has restricted the addition to 12.5% by following the ratio laid down by the Hon'ble Gujarat High Court discussed above, we do not find any reason to interfere with the findings of the Ld. CIT (A). In our considered view, the addition of 12.5% is reasonable to meet the ends of justice. Further, as pointed out by the Ld. counsel, the facts of the present case are different from the facts of the cases relied upon by the Ld. DR. We therefore, uphold the findings of the Ld. CIT (A) and the dismissed the revenue's appeal. ITA No. 3527/MUM/2019 (Assessment Year: 2010-11) In this case, the AO passed the assessment order u/s 143 (3) r.w.s. 147 of the Act after making addition of the entire amount of bogus purchases shown by the assessee. In the first appeal, the Ld.CIT (A) restricted the addition to 12.5% of the total amount of the bogus purcha....
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....r these circumstances, the Ld. CIT (A) ought to have confirmed the penalty levied by the AO u/s 271 (1) (c) of the Act. 4. On the other hand, the Ld. counsel for the assessee supporting the findings of the Ld. CIT (A) submitted that since the Ld. CIT (A) sustained the addition of 12.5% of the total amount of bogus purchases on estimate basis, penalty u/s 271 (1) (c) of the Act levied by the AO is not sustainable. The Ld. counsel further pointed out that the findings of the Ld. CIT (A) are based on the various decisions of the ITAT, therefore, there is no infirmity in the order passed by the Ld. CIT (A) to interfere with. 5. We have heard the rival submissions of the parties and gone through the material on record including the cases relied upon by the authorities below. The Ld. CIT (A) has deleted the penalty, levied u/s 271 (1) (c) of the Act, holding as under:- "6.I have gone through the order levying penalty passed by the AO and the statement of facts. The AO had added Rs. 15,14,869/- being entire bogus purchases to the total income of the assessee. Subsequently, the A.O. passed the penalty order u/s 271 (1) (c) of the Act on 31-08-2016 for furnishing inaccurate particulars....
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....osed as per the ratio laid down in the case of C.!. T. vs. Arjun Prasad Ajit Kumar, (2008) 214 CTR (All) 355, where it was observed that: "Appeal (High Court) -Substantial question of law- Penalty under section 271 (1)(c) CIT (A) deleted penalty under section 271(1)(c) on the ground that there being nothing on record that assessee's explanation lacked bona fides, penalty under section 271(1)(c) could not be imposed on the basis of estimating sales and making addition by applying net profit rate-Same was rightly sustained by Tribunal and no substantial question of law arises" 6.2.1 On the similar set of facts, the Hon'ble ITAT, Mumbai has deleted penalty u/s. 271(1)(c) of the Act in ITA No. 5586/Mum/2015 dated 16.01.2017 in the case of DC1T Cir 4(2)(2) vs. M/s. ManoharManak Alloys P. Ltd. On the same lines, the Hon'ble ITAT, Mumbai in ITA No. 7519/Mum/2013 dated 08.07.2015 in the case of M/s. Yashraj Films P. Ltd. vs. The A.C.l.T. Central Circle 29, Mumbai has deleted the penalty u/s. 271(1)(c) of the Act levied on addition made on estimation basis. Likewise, the Hon'ble ITAT, Mumbai in ITA No. 93/Mum/2011 dated 10.04.2015 in the case of DCIT 14(2) vs. M/s. Risha....