In a recent ruling, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that income tax penalty under section 271(1)(c) cannot be levied based on Information from outside agencies/departments.
Shri Poonam K.Prajapati, the assessee is engaged in the business of trading in ferrous and non-ferrous metal. The assessee has filed the return of income for the A.Y 2009-10 on 28.08.2009 disclosing a total income of Rs.1,99,830/- and the return of income was processed u/s 143(1) of the Act.
The Assessing Officer (AO) received the information from DGIT (Inv) that the assessee has obtained accommodation entries/bogus purchases bills from the six parties as per the information from Sales Tax Department. The AO has reason to believe that there is income escaping the Assessment and the assessee is one of the beneficiaries and issued notice under section 148 of the Act.
The AO found that the assessee has obtained accommodation entries/ bogus purchase bills from six parties aggregating to Rs.63,52,693/- and AO has issued notice u/s 133(6) of the Act on the six none genuine partiesand the said notices were returned unserved by the postal authorities.
The assessee failed to produce the details, the A.O. has dealt with facts and available material and applied the Best Judgement Assessment andalleged that the purchases are not genuine andmade the addition of Rs. 63,52,693/- and assessed the total income of Rs. 65,52,520/- and passed the order u/s 144 r.w.s 147 of the Act on 12.03.2015.
The A.O. levied a penalty based on the additions of bogus purchases which worked out to Rs.21,13,920/- and passed the order u/s 271(1)(c) of the Act.The CIT(A) confirmed the action of the A.O. in levy of the penalty and dismissed the appeal.
It was submitted that CIT(A) has restricted the addition considering the profit element @ 25%. Further, the assessee has filed an appeal before the Tribunal and the addition was restricted to theextent of 9%.
A Coram comprising of Shri Baskaran BR, Accountant Member & Shri Pavan Kumar Gadale, Judicial Member observed that the disallowance of purchases on an ad-hoc/estimated basis does not tantamount to furnishing inaccurate particulars of income under the provisions of Section 271(1) (c) of the Act.
Further, observed that the assessing officer made an addition based on the information received from the Sales tax department Maharashtra and held that “once the revenue accepts that penalty is levied based on information from the outside agency/ department, the penalty is not sustained.”
The Tribunal set aside the order of the CIT(A) and direct the assessing officer to delete the penalty by allowing the appealin favour of the assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
