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2020 (12) TMI 849 - AT - Income TaxPenalty u/s 271 (1)(c) - bogus purchases - CIT (A) sustained the addition of 12.5% made by the AO - HELD THAT - CIT (A) has deleted the penalty levied u/s 271 (1) (c) of the Act, by following the decisions of the coordinate Benches wherein the Tribunal has held that where the addition is made on estimate basis, penalty u/s 271 (1) (c) cannot be imposed. Since, the findings of the Ld. CIT (A) are based on the decisions of the coordinate Benches rendered in the cases discussed by the Ld. CIT(A), we do not find any reason to interfere with the findings of the Ld. CIT (A). We accordingly uphold the decision of the Ld. CIT (A) and dismiss the appeal filed by the revenue. Accordingly, we direct the AO to delete the penalty levied under section 271 (1) (c) of the Act. - Decided against revenue.
Issues involved:
Challenge to penalty order under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2011-12 based on disallowance of bogus purchases. Analysis: 1. The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12, where the penalty under section 271(1)(c) was partly allowed. The Assessing Officer (AO) had made an addition of 12.5% of the bogus purchases shown by the assessee, which was sustained by the CIT (A), leading to the initiation of penalty proceedings. The crucial question was whether the penalty was rightly deleted by the CIT (A) based on the assessee's explanation and evidence provided. 2. The revenue challenged the CIT (A)'s order on the grounds that the assessee failed to establish the genuineness of the purchases, justifying the addition made by the AO. The revenue contended that since the CIT (A) upheld the addition of 12.5%, the penalty under section 271(1)(c) should have been confirmed. On the other hand, the assessee's counsel argued that the CIT (A)'s decision was based on ITAT decisions and the penalty was not sustainable due to the estimation basis of the addition. 3. The ITAT examined the material on record and the arguments presented by both parties. The CIT (A) had deleted the penalty by considering the evidence submitted by the assessee, including purchase bills and bank statements, despite the suppliers not being traceable at given addresses. The ITAT noted that the AO disbelieved the explanation but found no other material suggesting concealment of income. The ITAT also referred to similar ITAT decisions where penalties were not upheld in cases of estimation-based additions. 4. Ultimately, the ITAT upheld the CIT (A)'s decision to delete the penalty under section 271(1)(c) based on precedents and lack of corroborative evidence for concealment of income. The ITAT dismissed the revenue's appeal and directed the AO to delete the penalty. The decision was based on the principle that penalties cannot be imposed solely on estimate-based additions, in line with previous ITAT rulings. In conclusion, the ITAT's judgment centered on the issue of penalty imposition under section 271(1)(c) in cases of disallowed bogus purchases. The decision emphasized the importance of corroborative evidence and highlighted that penalties cannot be levied solely on estimation basis, aligning with precedents set by the ITAT.
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