2010 (10) TMI 1152 - AT - Income Tax

Summary

Issues involved: Appeal against penalty u/s.271(1)(c) for addition to gross profit based on estimation.

Summary:
The assessee appealed against the penalty levied u/s.271(1)(c) by the AO on the addition made to the gross profit based on estimation. The CIT(A) sustained the penalty only on the addition of Rs. 16,20,937/-, as the ITAT allowed the set off of addition for bogus purchase against the GP addition. The ITAT confirmed the AO's finding that the books of accounts were unreliable due to bogus purchases. The ITAT upheld the AO's addition for bogus purchase but allowed the set off against the GP addition. The penalty u/s.271(1)(c) was upheld for the bogus purchases but not for the GP estimation. The AO was directed to compute the minimum penalty on the sum of Rs. 9,43,681/- for the bogus purchases. The assessee's appeal was partly allowed.

In the case, the AO made two additions - one for low GP of Rs. 16,20,937/- and another for bogus purchase of Rs. 9,43,681/-. The CIT(A) deleted the low GP addition but confirmed the bogus purchase addition. The ITAT reversed the CIT(A)'s finding on the GP addition, confirming the AO's decision. The ITAT upheld the AO's finding that the books were unreliable due to bogus purchases. The penalty u/s.271(1)(c) was deemed justified for the bogus purchases but not for the GP estimation. The AO was directed to calculate the penalty on the sum of Rs. 9,43,681/- for the bogus purchases. The assessee's appeal was partly allowed.