×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
1. These appeals are filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 1, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 05.12.2018 for the A.Ys. 2009-10, 2010-11 and 2011-12.
2. In all these appeals Revenue has raised the following identical grounds: -
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied u/s 271(l)(c) without properly appreciating the decisions of the Hon'ble Apex Court in the case of Mak Data Pvt. Ltd. Vs CIT( Civil Appeal No. 9772 of 2013 )", the Hon'ble Gujarat High Court's decision in the case of N. K. Proteins Ltd, Tax Appeal No. 242 of 2003 dated 20/06/2016 against which the SLP was dismissed by the Hon'ble Supreme Court and also ignoring the fact that Department received specific credible information in this case from the Sales Tax Department of the State Government of Maharashtra" in respect of non-genuine purchases.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied u/s 271(l)(c) without appreciating the fact that there was a definite finding in the assessment order in respect of bogus purchases and of furnishing inaccurate particulars of income relating to purchases resulting into concealment of income.
3. It is humbly requested that presen appeal is being filed in accordance with the CBDT's Instruction No. 3/2018 dated 11/07/2018 amended vide letter dated 20 08.2018 as per para 10(e) of the said circular. Therefore, the order of the CIT(A) may kindly be vacated and that of the AO may be resto ed.
4. The appellant craves leave to add, amend, alter or delete any ground of appeal.”
3. Briefly stated the facts are that, assessee an individual engaged in the business of “Trading in Electrical Items” filed return of income on 26.09.2009, 28.09.2010 and 26.09.2011 declaring income of ₹.6,97,060/- ₹. 7,27,330/- and ₹.9,81,699/- for the A.Ys. 2009-10, 2010-11 and 2011-12 respectively. Assessments were reopened u/s. 147 of the Act and reassessments were completed on 27/28.01.2015 u/s. 143(3) r.w.s 147 of the Act determining the income at ₹.7,30,047/-, ₹.9,90,728/- and ₹.21,15,197/- for the A.Ys. 2009-10, 2010-11 and 2011-12 respectively. While completing the reassessments the Assessing Officer treated purchases of ₹.2,63,898/-, ₹.21,07,189/- and ₹.90,67,990/- made from various dealers as non-genuine for the A.Ys. 2009-10, 2010-11 and 2011-12 respectively on the basis of the information received from Sales Tax Department, Mumbai that assessee has received accommodation entries from the party without making any purchases but made purchases only in gray market. The Assessing Officer treated such purchases from the parties as non-genuine as the assessee could not produce the parties and also could not establish the movement of goods. However, the Assessing Officer estimated the profit element from non-genuine purchases at 12.5% and brought to tax. The assessee accepted the estimation of profit element from non-genuine purchases made by the Assessing Officer and no further appeals have been preferred. Subsequently, Assessing Officer initiated the penalty proceedings and levied penalty u/s. 271(1)(c) of the Act stating that the assessee has deliberately furnished inaccurate particulars of its income and concealed its income within the meaning of section 271(1)(c) r.w. Explanation 1 of the Act. On appeal the Ld.CIT(A) deleted the penalty since the disallowance was made by making estimation of Gross Profit on the purchases. Against this order of the Ld.CIT(A), revenue is in appeal before us.
4. Ld. Counsel for the assessee supported the order of the Ld.CIT(A) and on the other hand, Ld. DR vehemently supported the order of the Assessing Officer.
5. We have heard the rival submissions, perused the orders of the authorities below. It is a settled position of law that penalty cannot be levied when an adhoc estimation is made. In this case an adhoc estimation was made by the Assessing Officer restricting the profit element in the purchases @12.5%. On identical situations the Coordinate Bench in the case of Shri Deepak Gogri v. Income Tax Officer in ITA.No. 1396/MUM/2017 dated 23.11.2017 held that no penalty is leviable observing as under: -
“6. We have heard the rival submissions, perused the orders of the authorities below In so far as the penalty levied on estimation of profit element on purchases is concerned, we are of the view that Assessing Officer had made only adhoc estimation of profit on certain purchases treated as unexplained expenditure. Assessing Officer did not doubt the sales made by the assessee from out of such purchases. Assessing Officer based on the decision of the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [356 ITR 451] estimated the profit element in such purchases at 12.5% and by reducing the Gross Profit already declared by the assessee. In the circumstances, we hold that there is no concealment of income or furnishing of inaccurate particulars as the profit element was determined by way of adhoc estimation. Coming to the interest, the assessee furnished complete details in the return of income and made a claim and simply because the claim is denied and cannot lead to furnishing of inaccurate particulars or concealment of income. No allegation by Assessing Officer that the assessee failed to disclose the particulars relating to its claim in the return of income.