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2020 (3) TMI 1234 - AT - Income TaxPenalty u/s 271(1)(c) - Bogus purchases - AO restricting the profit element in the purchases @15% - HELD THAT - It is a settled position of law that penalty cannot be levied when an adhoc estimation is made. In this case an adhoc estimation was made by the Assessing Officer restricting the profit element in the purchases @15%. On identical situations the Coordinate Bench in the case of Shri Deepak Gogri v. Income Tax Officer 2017 (11) TMI 1857 - ITAT MUMBAI held that no penalty is leviable as Assessing Officer had made only adhoc estimation of profit on certain purchases treated as unexplained expenditure.Assessing Officer did not doubt the sales made by the assessee from out of such purchases - there is no concealment of income or furnishing of inaccurate particulars as the profit element was determined by way of adhoc estimation. Hon'ble Delhi High Court in the case of CIT v. Aero Traders Pvt. Ltd. 2010 (1) TMI 32 - DELHI HIGH COURT wherein held that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars.- In the case on hand the Assessing Officer has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. - Decided in favour of assessee.
Issues Involved:
1. Deletion of penalty for alleged bogus purchases. 2. Genuineness of transactions and inability to produce parties for verification. 3. Alleged intention to reduce taxable income. 4. Applicability of the Supreme Court's decision in MAK Data (P) Ltd Vs CIT. 5. Basis for additions made from information received from the Sales Tax Department. 6. Compliance with CBDT's Instruction No. 3/2018. Issue-wise Detailed Analysis: 1. Deletion of penalty for alleged bogus purchases: The revenue contested the deletion of the penalty imposed on the assessee for alleged bogus purchases. The Assessing Officer (AO) had treated purchases amounting to ?22,82,508 as non-genuine based on information from the Sales Tax Department, Maharashtra. The AO estimated the profit element from these purchases at 15% and levied a penalty under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income. The Ld.CIT(A) deleted the penalty, leading to the revenue's appeal. The Tribunal noted that penalty cannot be levied on an adhoc estimation, referencing similar cases where penalties were not upheld when profit elements were determined by estimation. 2. Genuineness of transactions and inability to produce parties for verification: The revenue argued that the assessee failed to prove the genuineness of the purchases and could not produce the alleged bogus parties for verification during assessment and penalty proceedings. The Tribunal observed that the AO's estimation of profit on alleged non-genuine purchases was adhoc and did not constitute concrete evidence of concealment or furnishing inaccurate particulars. The Tribunal cited previous cases where penalties were not sustained due to lack of concrete evidence and reliance solely on third-party information without independent verification. 3. Alleged intention to reduce taxable income: The revenue claimed that the assessee intended to reduce taxable income by claiming purchases from non-genuine parties. However, the Tribunal found that the AO's estimation of profit was not backed by concrete evidence of such intention. The Tribunal reiterated that penalty cannot be imposed based on estimated additions without substantial proof of concealment. 4. Applicability of the Supreme Court's decision in MAK Data (P) Ltd Vs CIT: The revenue referenced the Supreme Court's decision in MAK Data (P) Ltd Vs CIT to support the penalty. The Tribunal, however, distinguished the present case, noting that the penalty in MAK Data was upheld due to clear evidence of concealment, whereas in the current case, the additions were based on adhoc estimation without concrete proof of concealment. 5. Basis for additions made from information received from the Sales Tax Department: The revenue justified the additions based on information from the Sales Tax Department. The Tribunal acknowledged the information but emphasized that the AO did not conduct further independent investigations to substantiate the claims. The Tribunal referenced multiple cases where additions based solely on third-party information were not upheld, highlighting the need for independent verification. 6. Compliance with CBDT's Instruction No. 3/2018: The revenue mentioned compliance with CBDT's Instruction No. 3/2018 for filing the appeal. The Tribunal did not find this instruction relevant to the substantive issue of penalty deletion and focused on the lack of concrete evidence for concealment. Conclusion: The Tribunal upheld the Ld.CIT(A)'s order deleting the penalty, emphasizing that penalties cannot be imposed based on adhoc estimations without concrete evidence of concealment or furnishing inaccurate particulars. The appeal of the revenue was dismissed.
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