2021 (8) TMI 555 - AT - Income Tax

Penalty u/s 271(1)(c) - Monetary limit for filing appeal - assessee had obtained accommodation entries in the form of certain bogus purchase bills from certain hawala parties which were in the business of providing bills without delivery of goods etc - HELD THAT - Admittedly it is a settled position of law that quantum proceedings and penalty proceedings are independent and distinct proceedings and confirmation of an addition cannot on a standalone basis justify imposition/upholding of a penalty u/s 271(1)(c) of the Act. Adopting the same logic we are of the considered view that unless a specific exception is provided in the circular w.r.t penalty also it could by no means be construed that penalty was to be treated at par with the quantum additions. As is discernible from Clause 10(e) of the aforesaid CBDT Circular No. 3/2018 (as amended on 20.08.2018) the same applied only to additions which were based on information received from external sources. As noticed since the levy of penalty by no means could be construed as an addition within the meaning of Clause 10(e) of the aforesaid circular therefore we do not find any merit in the contentions advanced by the ld. D.R that the aforesaid exception carved out in the CBDT Circular No. 3/2018 (supra) would also take within its realm a penalty imposed under Sec. 271(1)(c) w.r.t the additions made by the A.O towards bogus purchases on the basis of information received from Sales Tax Department i.e an external agency. Accordingly finding favour with the claim of the ld. A.R that the appeal of the revenue is covered by the CBDT Circular No. 17/2019 dated 08.08.2019 the same thus in our considered view is not maintainable. Accordingly we herein dismiss the appeal of the revenue for the reason that the tax effect therein involved is lower than that contemplated in the aforesaid CBDT Circular fixing the monetary limit of filing of appeals by the revenue before the Tribunal. Appeal of the revenue is dismissed.

Summary

Issues:
1. Penalty under Sec. 271(1)(c) for bogus purchases.
2. Maintainability of the revenue's appeal based on CBDT Circular.

Analysis:
1. The case involves a penalty under Sec. 271(1)(c) of the Income Tax Act, 1961, concerning the addition of Rs. 14,37,072 as bogus purchases by the assessee. The Assessing Officer (A.O) imposed a penalty of Rs. 55,507 under Sec. 271(1)(c) after the CIT(A) sustained the addition to the extent of 12.5% of the value of the impugned purchases. The CIT(A) later vacated the penalty, stating that it was imposed on an adhoc estimation basis and that no penalty for concealment of income could be imposed. The revenue appealed against the CIT(A)'s decision, but the tribunal dismissed the appeal, noting that the tax effect was below the threshold limit for filing appeals by the revenue.

2. The second issue pertains to the maintainability of the revenue's appeal based on the CBDT Circular. The tribunal highlighted the exception in Clause 10(e) of the CBDT Circular No. 3/2018, which applies to cases where additions are based on information from external sources. The tribunal concluded that the penalty proceedings and quantum proceedings are distinct, and unless a specific exception is provided in the circular for penalties, they cannot be equated with quantum additions. As the penalty in this case was not covered by the exception in the circular, the tribunal found the revenue's appeal to be not maintainable under the CBDT Circular No. 17/2019.

In conclusion, the tribunal dismissed the revenue's appeal, emphasizing that the tax effect was below the threshold limit specified in the CBDT Circular for filing appeals. The judgment underscores the importance of distinguishing between quantum additions and penalties, especially when considering exceptions outlined in CBDT Circulars for maintaining appeals.