TMI Blog2021 (9) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... ous. 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. We delete the levy of penalty - Decided in favour of assessee. - I.T.A. Nos. 1547 &1548/Mum/2020 (Assessment Years : 2010-11 & 2011-12), I.T.A. Nos. 1549 & 1550/Mum/2020 (Assessment Years : 2010-11 & 2011-12) - - - Dated:- 20-9-2021 - Shri Shamim Yahya (AM) Shri Ravish Sood (JM) Department by : Shreekala Pardeshi O R D E R Per bench :- These are Revenue s appeals directed against respective orders of learned CIT(A) for the concerned assessment years. 2. Since the issues are common and connected and the appeals were heard together, these have been consolidated and disposed off together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings, the assessee filed ledger of the parties copies of purchase and sales bills and bank account statement proving the payments through banking channels. However, the AO held that the assessee failed to explain the purchases by not producing any lorry receipts and delivery details and failed to discharge onus by producing the parties before him, and added the 100% of the total purchases as nonPravin genuine to the total income. On appeal, the CIT(A) estimated 12.5% of the said purchases as profit. On further appeal by the assessee, ITAT Mumbai in 3532, 3533, 3534 and 3535/M/2018 dated 28.06.2019 reduced the profit from the bogus purchases to 5%. During the penalty proceedings, the assessee filed explanation as to why penalty cannot be levied on estimated addition in the assessment. However, the AO has not accepted the contention of the assessee and imposed penalty of ₹ 3,;57,078 being100%% of tax evaded on estimated profit of 12.5%after the order of the CIT(A), holding that had the case was not selected for scrutiny, the income finally assessed/confirmed by the CIT(A) would have escaped tax. AO placed reliance on Explanation 1 to section 271(1)(c) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rve that the assessee has already accounted for these purchases in the books of accounts and have returned the profits on these purchases. Under these circumstances, in our view, the only savings which the assessee may have made by purchasing the goods from the grey market have to be brought to tax. In the present case, the assessee is a dealer in iron and steel items and the applicable VAT rate is 4%. Under these circumstances, we are of the view that the purchases which are stated to be bogus should be brought to tax @ 5%. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to apply a rate of 5% on these bogus purchases. Department is not in further appeal on the order of the ITAT, It is seen that finally the income assessed in the hands of the appellant is based on estimation of profit. Estimation is a pure guess work and where income is estimated, it cannot be said that 'inaccurate particulars' have been furnished. Appellant argued that he genuinely purchased the goods based on the bills in his possession which the AO has not accepted. Furnishing of inaccurate particulars been not been established by the Assessing Officer, therefore, in such a case p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e estimation of profits, the Hon'ble Tribunal has deleted penalty u/s 271(1)(c) of the Act. Relevant extracts are reproduced as under: We have considered the rival submission of the parties and have gone through the orders of authorities below. The perusal of assessment order reveals that the assessing officer, while passing the assessment order under section 143(3) rws 147, made the addition on the basis of estimation. The assessing officer made addition (g? 25% of the alleged bogus purchases. The revenue has not disputed that additions were made merely on the basis of estimation. It is settled law that no penalties is leviable under section 271(1)(c) for ad hoc /estimated additions. Similar view has been taken in the various decisions cited by learned AR for the assessee. Accordingly, we are of the opinion that this is not a fit case for levy of penalty. In the result the grounds of appeal raised by the assessee is allowed. In the light of above, the levy of penalty of ₹ 3,57,078/- u/s. 271(1)(c) of the Act is held not to be justified on the estimated income. The AO is therefore directed to delete the penalty levied u/s 271(1)(c) of the Act. Accordingly, the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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