PRATIKSHA J. KUDTARKAR, MUMBAI Vs. ITO - 26 (2)(4), MUMBAI

The Income Tax Appellate Tribunal (ITAT) has ruled that penalties under Section 271(1)(c) of the Income Tax Act cannot be imposed on estimated additions made by the Assessing Officer. In this case, the assessee, Ms. Pratiksha J. Kudtarkar, appealed against penalties levied for assessment years 2009-10 and 2010-11, which were based on estimated bogus purchases. The Tribunal found merit in the assessee's argument that such penalties are unlawful when based on estimations, leading to the deletion of the penalties and allowing the appeals.

IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “C”, MUMBAI

BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA NOS. 2673 & 2674/MUM/2019 : A.Ys : 2009-10 & 2010-11

Ms. Pratiksha J. Kudtarkar
B-24, Kojagiri Apartment,
Bomandayapada,
Marol Military Road, Tunga Village,
Mumbai 400 072.
PAN : AIQPK2019K (Appellant)

Vs.

ITO – 26(2)(4),
Mumbai. (Respondent)

Assessee by : Ms. Neha Sharma
Revenue by : Shri Uodal Raj Singh
Date of Hearing : 14/10/2020
Date of Pronouncement : 14/10/2020

O R D E R

PER SHRI VIKAS AWASTHY, JM :

These two appeals by the assessee for Assessment Years 2009-10 & 2010-11, are directed against the order of Commissioner of Income Tax (Appeals)-38, Mumbai (in short ‘the CIT(A)’) for the respective assessment years, confirming levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’). Both the impugned orders are of even date, i.e. 27.11.2018. Since, the facts in both the appeals are similar and the grounds of appeal are identical, these appeals are taken up together for adjudication and are disposed off vide this common order.

2. Ms. Neha Sharma representing the assessee submitted that the assessee is engaged in manufacturing of CNC pipe bending machines used in automobile industry. During the assessment proceedings for the impugned assessment years, the addition was made on account of bogus purchases by estimating gross profit at 25% in Assessment Year 2009-10 and 12.5% in Assessment Year 2010-11. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act in respect of addition made on account of bogus purchases and levied penalty of Rs.70,424/- in Assessment Year 2009-10 and Rs.1,25,874/- in Assessment Year 2010-11. The assessee filed appeals before the CIT(A) assailing levy of penalty. The CIT(A) dismissed the appeals without appreciating the facts. The ld. Assessee Representative (in short ‘AR’) submitted that it is a well-settled legal proposition that no penalty under Section 271(1)(c) of the Act can be levied on estimated additions. The ld. AR prayed for deleting the penalty. 

3. On the other hand, Shri Uodal Raj Singh representing the Department vehemently defended the impugned order and prayed for dismissing the appeals of assessee.

4. We have heard the submissions made by rival sides and have examined the orders of the authorities below. The Assessing Officer in the assessment proceedings for the respective impugned assessment years has made estimated addition on account of bogus purchases. Penalty proceedings under Section 271(1)(c) of the Act were initiated for such additions and vide order dated 29.09.2015 for Assessment Year 2009-10 and vide order dated 28.07.2016 for Assessment Year 2010-11, levied penalty under Section
271(1)(c) of the Act. It is a well-settled legal position that penalty under Section 271(1)(c) of the Act cannot be levied on estimated addition [Re. : CIT vs Krishi Tyre Retreading & Rubber Industries, 360 ITR 580 (Raj.)]. We find merit in the submissions of ld. AR of assessee. Accordingly, the penalty levied under Section 271(1)(c) of the Act for both the impugned assessment years is deleted. The impugned orders are set-aside and the appeals of assessee are allowed. 

5. In the result, appeals of the assessee for Assessment Years 2009-10 and 2010-11 are allowed. 

Order pronounced in the open court on Wednesday, the 14th day of October, 2020.

Sd/-                                                                             Sd/-
(RAJESH KUMAR)                                                    (VIKAS AWASTHY) 
 ACCOUNTANT MEMBER                                        JUDICIAL MEMBER

Mumbai, Date : 14th October, 2020 
*SSL*
Copy to : 
1) The Appellant 
2) The Respondent 
3) The CIT(A) concerned 
4) The CIT concerned 
5) The D.R, “C” Bench, Mumbai 
6) Guard file 

By Order
Dy./Asstt. Registrar 
I.T.A.T, Mumbai