The assessee, M/s. Toshvin Analytical Private Limited filed its return of income declaring loss of Rs.11,81,98,172/-. The assessment was completed determining total income of Rs.12,59,09,760/-. The AO made additions to the total income and initiated penalty proceedings u/s 271(1)(c) of the Act on account of Bogus purchases Rs.53,26,539/-
Against this, the assessee preferred an appeal before CIT(A). The CIT(A) confirmed the addition on account of bogus purchases to the extent of Rs.6,65,817/-. The assessee was given relief of Rs.46,60,722/-. As regards the issue of foreign education expenses of Rs.15,00,947/-, the CIT(A) dismissed the assessee’s appeal. The AO then proceeded with penalty proceedings. During the course of penalty proceedings, the AO held that the assessee has furnished inaccurate particulars and thus concealed income to the extent of Rs.21,66,764/-. Therefore, AO levied a minimum penalty of Rs.7,22,182/- u/s 271(1)(c) of the Act.
Upon assessee appeal, the CIT(A) noted that, in appeal for addition, the CIT(A) has deleted the disallowances u/s 14A and ITAT has deleted the disallowances on account foreign education expense and as regards the bogus purchases ITAT has sustained addition only at Rs. 3,83,388/-. The CIT(A) held that the penalty remains only with reference to these bogus purchase additions. Referring to several decisions of ITAT on such situations and finding the addition only on an estimated basis, the CIT(A) deleted the penalty.
The coram of Judicial Member Pavan Kumar Gadale and Accountant Member Shamim Yahya ruled that the penalty in this case is only with reference to addition on bogus purchases amounting to Rs.3,83,388/-. The addition was sustained by the ITAT 8% of the bogus purchases. On the facts and circumstances of the case, the Ld.CIT(A) has passed a reasonable order. He has correctly deleted the penalty with reference to bogus purchase addition at Rs.3,83,388/-, as the addition was done on an estimated basis.
“We further note that the tax effect in this case is below the limit fixed by CBDT for filing appeals before ITAT. The Revenue has tried to make out a case that since the addition was made pursuant to information from sales tax department, this penalty appeal falls in the exception carved out in the CBDT circular regarding appeals arising out of additions made pursuant to information from outside agencies. We are of the opinion that this plea is not tenable inasmuch as once revenue accepts that penalty is levied on outside agency information ,the penalty levied will have no legs to stand,” the ITAT added.Subscribe Taxscan AdFree to view the Judgment