2025 (11) TMI 1387

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...., dated 29/11/2023, passed under Section 270A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2.1. The Assessee has raised following grounds of appeal in ITA No.3166/Mum/2025 [Assessment Year 2019-2020] : "1. The Ld. Commissioner of Income Tax (Appeals) - 53, Mumbai ["Ld. CIT(A)"] erred in confirming the penalty of Rs. 2,93,956/- levied by the Assessing Officer ("the A.O.") under Section 270A of the Income Tax Act, 1961 ("the Act"). 2. While confirming the penalty levied by the A.O., the Ld. CIT(A) failed to appreciate that neither in the assessment order dated 30th September 2021 nor in the penalty notices dated : 30th September 2021 and 23rd November 2023, the A.O. had specified as to whether penalty is proposed for any of the conditions mentioned in section 270A(2)(a) to 270A(2)(g) of the Act by virtue of which the income of the Appellant is considered to have underreported its income or in Section 270A(9)(a) to Section 270A(9)(f) by virtue of which the Appellant had misreported it's income. 3. The CIT(A) failed to appreciate that no penalty under section 270A of the Act was imposable on estimated addition because the factum of e....

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.... addition on account of alleged bogus purchases to INR.1,99,328/- being 5% of the alleged bogus purchases of INR.39,86,587/- made from the following four parties: Sr. No. Name Amount (INR) 1. V. H. Enterprises 12,45,495 2. Mahavir Enterprises 2,86,600 3. Vimalanath Associates 12,34,457 4. Vimalnath Corporation 12,20,035   Total 39,86,587 5. Being aggrieved by the relief granted by the First Appellate Authority. The Revenue also filed Cross Objections. Vide Common Order, dated 27/02/2023, appeals and cross objections pertaining to Assessment Year 2018-2019 and 2019-2020 were disposed off by the Tribunal. While deciding ITA No.2713/Mum/2022 & Cross Objection No.08/Mum/2023 pertaining to Assessment Year 2019-2020 (taken as a lead matters), the Tribunal confirmed the order passed by the Ld. CIT(A) restricting the disallowance to 5% of purchase made from the four parties giving separate reasoning. 6. Subsequent to the above decision of the Tribunal, show cause notice dated 23/11/2023 was issued to the Assessee in the penalty proceedings. The Assessing Officer concluded that the Assessee had under-reported income in consequ....

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....ied in levying penalty for misreporting of income. Referring to Paragraph 10 to 13 of the Penalty Order the Learned Departmental Representative submitted that the claim of deduction made by the Assessee was not supported by documentary evidence or explanation and therefore, there was clear misreporting of income on the part of the Assessee. 11. We have given thoughtful consideration to rival submissions and have perused the material on record including the orders passed by Income Tax Authorities. 12. There is no dispute as to the fact that in the quantum proceedings a disallowance of 5% of alleged bogus purchases aggregating to INR.39,86,587/- made from four parties was confirmed by the Tribunal vide Common Order, dated 27/02/2023, whereby appeals [ITA No.2712&2713/Mum/2012] and Cross Objections [C.O.No.09&08/Mum/2023] pertaining to Assessment Year 2018-2019 and 2019-2020 were disposed off by the Tribunal. The relevant extract of the aforesaid common order pertaining to appeal preferred by the Revenue for the Assessment Year 2019-2020 [ITA No.2713/Mum/2012] and the Cross Objections filed by the Assessee [C.O.No.08/Mum/2023] reads as under: "7. After hearing both the ....

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....by AO in the remand report). The Ld DR, could not point out any infirmity in the action of Ld CIT(A) which is based on material and cannot be termed as perverse, so we uphold the impugned order. Even though, we uphold the action of the Ld. CIT(A), it is not on the reason given by the Ld. CIT(A) but on the ground that since the sale figure have not been disturbed by the AO, and the Ld. CIT(A) has given a finding of the fact that the assessee was Government contractor and has completed the projects namely undertaken by it for BMC & MCGM and on successful completion of work/contract has received the payments from them, the presumption drawn is that the assessee might have procured the material [for execution of work] from the grey market and have approached these accommodation entry providers-(seven parties) for accommodation bills by giving commission to them, for saving some money. Therefore, the gross profit (GP) only need to be added (profit embedded in the bills procured from entry providers which is prevalent in the line of business). Therefore, we uphold the action of the Ld. CIT(A) and dismiss the appeal of the revenue" (Emphasis Supplied) 12.1. On perusal of the above extr....

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.... of the Act before the Assessing Officer can levy penalty at a higher rate of 200% of the amount of tax on under-reported income by invoking provisions of Section 270A(8) of the Act. Accordingly, while levying penalty under Section 270A of the Act for under-reporting income in consequence of misreporting, the Assessing Officer is required to establish that there is misreporting and that such misreporting falls within the cases of misreporting specified in Section 270A(9)(a) to 270A(9)(g) of the Act. Therefore, we hold that while passing the penalty order under Section 270A(1) read with Section 270A(8) of the Act the Assessing Officer is required to specify the specific limb of Section 270A(9) of the Act under which the Appellant was held to have misreported its income leading to under-reporting of income. The invocation of specific limb of Section 270A(9)(a) to 270A(9)(g) of the Act should either be apparent from the express provisions stated in the penalty order or should be unambiguously discernable from the reading of the penalty order as a whole; and in absence of the same penalty levied under Section 270A of the Act cannot be sustained. In the case before us, on perusal of Pen....

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....Section 270A(9)(a) to Section 270A(9)(f) by virtue of which the Appellant had misreported it's income. 3. The CIT(A) failed to appreciate that no penalty under section 270A of the Act was imposable on estimated addition because the factum of either under reporting of income or mis-reporting of income, is not proved. Thus, no penalty would be imposable in case of trading addition on estimate basis. 4. The Ld. CIT(A) failed to appreciate that additions which are based on estimates or which do not conclusively show that assessee had under reported or misreported its income as per the provisions of section 270A(2) or 270(9) of the Act so as the constitute the basis for imposition of penalty. 5. The Ld. CIT(A) failed to appreciate that the A.O. passed the penalty order under Section 270A of the Act without affording sufficient, proper, adequate and effective opportunity of being heard to the Appellant. 6. The Ld. CIT(A) failed to appreciate that in the case of Appellant the assessment had been completed the addition stood confirmed on mere estimate basis up to Tribunal stage, this fact cannot be conclusive so far as penalty proceedings are concerned. ....