S. Rifaur Rahman ORDER
Vikas Awasthy, Member (J)
1. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A)'] dated 01/09/2023, for the Assessment Year 2009-10, confirming levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961[in short 'the Act'].
2. Shri Rajesh Bhende appearing on behalf of the assessee submitted that the Assessing Officer vide assessment order dated 23/03/2015 passed u/s. 143(3) r.w. 147 of the Act made addition of Rs. 1,00,15,634/- on account of bogus purchases. The Assessing Officer made addition of 100% of unproved purchases and initiated penalty proceedings u/s. 271(1)(c) of the Act on the said addition. The assessee carried the issue in appeal before the CIT(A). The CIT(A) on estimations restricted the addition to 12.5% of the alleged bogus purchases. The Assessing Officer vide order dated 31/03/2018 levied penalty u/s. 271(1)(c) of the Act in respect of the addition confirmed by the CIT(A). Against the order levying penalty, the assessee filed appeal before CIT(A). The CIT(A) without appreciating the facts and legal position confirmed the penalty.
2.1. The ld. Authorized Representative of the assessee submits that the Assessing Officer had made addition merely on estimations, which was reduced by the CIT(A). It is a settled legal principle that no penalty can be levied on addition based on estimations. To support his submissions, he placed reliance on the following decisions:
(i) DCIT vs. Shyam Kundandas Gyanchandani, ITA No. 2559/Mum/2022 For A.Y.2009-10,decided on 03/02/2023.
(ii) Fancy Diamond India Pvt. Ltd. Vs. DCIT, ITA No. 961 to 963/Mum/2023, For A.Y.2010-11 to A.Y.2012-13, decided on 20/06/2023.
(iii) Sushila Goyal Vs. ITO, ITA No. 3012/Del/2019 for A.Y. 2014-15,decided on 31/05/2023.
3. Per contra, Ms. Rajeshwari Menon representing the Department vehemently defended the impugned order. The ld. Departmental Representative submits that the assessee had indulged in bogus transactions. The assessee was not able to prove genuineness of the purchases hence, the Assessing Officer made addition of 100% of such purchases. The CIT(A) restricted the addition to 12.5%, the Assessing Officer levied penalty u/s. 271(1)(c) of the Act on the addition confirmed by the CIT(A). She prayed for upholding the impugned order and dismissing appeal of the assessee.
4. We have heard the submissions made by rival sides. It is an undisputed fact that the Assessing Officer has made addition in the case of assessee on account of alleged bogus purchases. The Assessing Officer made addition of 100% of unproved purchases, the CIT(A) restricted the addition to 12.5% of such purchases. The addition made by the Assessing Officer and subsequently restricted by the CIT(A) to 12.5% is merely on estimations.
5. The Hon'ble Rajasthan High Court in the case of CIT vs. Krishi Tyre Retreading and Rubber Industries reported as MANU/RH/1467/2013 : 360 ITR 580 has held that where addition is made purely on estimate basis, no penalty u/s. 271(l)(c) of the Act is leviable. Similar view has been expressed by the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Sangrur Vanaspati Mills Ltd. reported as MANU/PH/0284/2008 : 303 ITR 53. The Hon'ble High Court approving the order of Tribunal held that when the addition has been made on the basis of estimate and ........