The Income Tax Appellate Tribunal (ITAT) Mumbai bench deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act ,1961 on estimated quantum addition based upon information from the sales Tax Department. Assesee, Jaisingh H. Solanki is an individual, proprietor of M/s. Blue Star International engaged in the business of Trading (retailer/wholesaler) of Ferrous and Non-Ferrous Metal. After filing the return of income the assessee case was reopened stating that he has received information from the Sales Tax Department that the assessee was a beneficiary of accommodation entries/bills from the parties named therein to the tune of Rs.2,35,64,090/.
Pursuant to the notices by the AO, the assessee replied that the transaction with six (6) parties. Although the AO admitted that the Assessee had filed the necessary paperwork, the Assessee was unable to file the delivery challans, truck receipts, etc. As the assessee was unable to provide the suppliers for verification and the six (6) parties had admitted to the Sales Tax Department that they were in the business of providing accommodation entries, the AO calculated the profit from the fraudulent purchase to be Rs. 2,35,64,090 @ 12.5%, or Rs. 29,45,511/ Aggrieved by the order, assesee filed an appeal before the CIT(A). The CIT(A) upheld the AO’s decision but partially granted the assessee’s appeal by ordering the AO to decrease the profit already reported by the assessee on these transactions, bringing the anticipated increase down to Rs. 12,04,124/-.
Thereafter, AO issued notice under Section 271(1)(c) of the Income Tax Act on 03.03.2016 and after considering the reply of the assessee levied penalty of Rs.5,27,640. The assessee, who was dissatisfied, filed an appeal with the CIT(A)/NFAC, who was pleased to affirm it. It was observed by the tribunal that the basis of estimated addition in the quantum assessment was based upon information from the Sales Tax Department that the assessee was a beneficiary of accommodation bills to the tune of Rs.2,35,64,090/- The quantum addition was purely on estimated basis . After considering the facts and circumstance, the two member bench of Amarjit Singh (Accountant Member ) and Aby T. Varkey, (Judicial Member) deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act on estimated quantum addition based upon information from the sales Tax Department. Therefore the bench allowed the appeal of the assessee. During the appeal proceedings no one appeared for assessee. Ujjawal Kumar Chavan counsel appeared for the revenue.