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2023 (6) TMI 1370 - AT - Income TaxPenalty levied u/s 271(1)(c) - Estimation of income on bogus purchases - CIT(A) reduced the rate of profit to 6% - HELD THAT - Since the facts of the issue under consideration are identical with the facts of the appeal pertaining to AY 2013-14 2022 (6) TMI 1359 - ITAT MUMBAI decided by the co-ordinate bench, following the said decision, we hold that the penalty levied u/s 271(1)(c) is liable to be cancelled in the instant cases since the additions have been made on estimated basis. Accordingly, we set-aside the orders passed by the CIT(A) in all the three years under consideration and direct the AO to delete the penalty levied u/s 271(1)(c). Decided in favour of assessee.
Issues involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act for Assessment Years 2010-11 to 2012-13.
Summary: 1. The assessee, engaged in diamond manufacturing and trading, contested penalty levied by the Assessing Officer under Section 271(1)(c) of the Act for alleged bogus purchases. The Assessing Officer estimated profits at 12.5%, later reduced to 6% by Ld. CIT(A), resulting in penalties of Rs.1,74,158/-, Rs.6,40,981/-, and Rs.21,93,310/- for the respective years. 2. The AR argued that penalties on estimated additions are not justified, citing a similar case where the penalty was deleted by a co-ordinate bench. The AR referred to precedents like CIT vs Krishi Tyre Retreading & Rubber Industries and others to support the argument for penalty deletion on estimated additions. 3. After considering the arguments, the Tribunal held that penalties under Section 271(1)(c) of the Act cannot be imposed on estimated additions. Citing the decision of the co-ordinate bench in a similar case for Assessment Year 2013-14, the Tribunal concluded that penalties on estimated basis additions are unsustainable. Therefore, the penalties levied by Ld. CIT(A) for all three years were set aside, directing the Assessing Officer to cancel the penalties. Judgment: All three appeals filed by the assessee were allowed, and the penalties under Section 271(1)(c) of the Act for the respective years were directed to be deleted.
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