Petition filed on account of penalty levied under section 271(1)(c) of the I.T. Act amounting to Rs.8,83,647/-

The Income Tax Appellate Tribunal (ITAT) Mumbai has dismissed an appeal by the Revenue concerning a penalty of Rs. 8,83,647 levied under Section 271(1)(c) of the Income Tax Act. The penalty was based on the disallowance of purchases deemed 'bogus' by the Assessing Officer. However, the ITAT found that the disallowed amount was a minuscule portion of the total purchases and that the CIT(A) had correctly relied on Supreme Court and Bombay High Court decisions. The Tribunal concluded that a simple disallowance of a claim does not automatically warrant a penalty, especially when the claim is not 'ex facie bogus'.

 THE INCOME TAX APPELLATE TRIBUNAL
“A” Bench, Mumbai
 Shri Shamim Yahya (AM) & Shri Pavankumar Gadale (JM)

 I.T.A. No. 4869/Mum/2019 (Assessment Year 2011-12)

ACIT-27(1)
Room No. 408
Tower No. 6
Vashi Railway Station
Complex, Vashi
Navi Mumbai-400 703.
PAN : AAFFA2914E
(Appellant) 

Vs. 

M/s. Ashapura
Construction Co.
Shop No. 4, Vikram
Apartment, New
Maneklal Estate
Ghatkopar West
Mumbai-400 086.
(Respondent)

Assessee by None
Department by Shri Azhar Zain
Date of Hearing 07.04.2021
Date of Pronouncement 01.06.2021

 O R D E R

Per Shamim Yahya (AM) :-

This is an appeal by the Revenue against the order of learned CIT(A) dated 18.4.2019 and pertains to assessment year 2011-12.

2. The issue raised is that learned CIT(A) erred in deleting the penalty levied under section 271(1)(c) of the I.T.Act amounting to Rs.8,83,647/-.

3. Brief facts of the case are that assessee in this case is a builder. Assessee had made a total purchase of rupees 11,59,26,335/-. Assessing officer received information that assessee has engaged in bogus purchases amounting to rupees 28,59,700/- from four parties. Assessing officer proceeded to make the impugned addition on the ground that assessee was not in a position to produce the alleged suppliers and the delivery challan were not produced. Penalty under section 271(1)(c) of the Act was also levied on this. 

4. Upon assessee's appeal learned CIT(A) referred to the decision of honourable Supreme Court the case of reliance Petro Products Pvt. Ltd. (322 ITR 158). Accordingly, he held that a disallowance of the assessee's claim cannot lead to levy of penalty under section 271(1)(c) of the Act.

5. Against this order revenue is in appeal before us. We have heard the learned departmental representative. None appeared on behalf of the assessee.

6. Upon careful consideration we note that assessee has made a huge amount of total purchases. Out of the same a minuscule amount has been disallowed as bogus purchases on the reasoning that assessee has not been able to produce the alleged suppliers and the concerned delivery challan is not produced. In our considered opinion the aforesaid purchase is a very minuscule of the total purchases made by the assessee. The disallowance of bogus purchase on the information of sales tax Department without any doubt or disturbance in any of the other aspects of the working of the assessee is not sustainable. On many occasions on search reasoning the entire addition has been deleted on the touchstone of honourable Bombay High Court decision in the case of Nikunj Eximp Enterprise Pvt. Ltd. (372 ITR 619). Furthermore learned CIT(A) has rightly relied upon the decision of honourable Supreme Court in the case of reliance Petro products. The aforesaid decision expounded hat the disallowance of the claim of the assessee does not ipso facto lead to the conclusion that assessee should be visited with the regours of penalty if the claim made is not found to be ex-facie bogus. In our considered opinion, the claim of the assessee is not at ex facie bogus. Hence we find no infirmity in the order of learned CIT(A) in deleting the penalty.

7. We further note that the tax effect in this case is less than limit fixed by the CBDT for filing appeals before the ITAT. The reasoning of the Revenue is that addition has been made on the basis of sales tax Department information. So the penalty levied also falls under the exception carved out of the CBDT circular on the reasoning that this is based upon outside agency information. 

We do not accept the submission of the revenue. We find that once the revenue contends that this penalty is based upon the information from an outside agency revenues ground of levy of penalty will have no legs to stand. Accordingly in the background of aforesaid discussion we dismiss the ground raised by the Revenue.

8. In the result this appeal by the revenue is dismissed.

Pronounced in the open court on 1.6.2021.

 Sd/-                                                Sd/-
 (PAVANKUMAR GADALE)          (SHAMIM YAHYA)
 JUDICIAL MEMBER                     ACCOUNTANT MEMBER

Mumbai; Dated : 01/06/2021
Copy of the Order forwarded to :

1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard File.

BY ORDER,
 //True Copy//

 (Assistant Registrar)
PS ITAT, Mumbai