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2021 (3) TMI 1118 - AT - Income TaxPenalty u/s 271(1)(c) - estimation of income on bogus purchases made by the assessee - HELD THAT - As per the law, the provisions of section271 (1) (c) of the Act would be applicable only where the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. However, the estimation of higher rate of profits by the AO cannot be termed as either concealment or furnishing of inaccurate particulars of income. As decided in M/S. NORTON ELECTRONICS SYSTEMS PVT. LTD 2014 (2) TMI 606 - ALLAHABAD HIGH COURT and M/S VISION RESEARCH AND MANAGEMENT PVT. LTD. 2014 (11) TMI 1228 - ITAT LUCKNOW when addition is made on estimate basis, no penalty is sustainable. There is no active concealment of income on the part of the assessee and additions made on estimation by the AO do not called for initiation of penalty. Thus, in our view, the penalty levied by AO and confirmed by Ld. CIT(A) is hereby deleted - Appeal filed by the assessee stands allowed.
Issues:
1. Penalty u/s 271(1)(c) - Concealment or furnishing inaccurate particulars of income. 2. Validity of penalty notice issued by Assessing Officer. 3. Applicability of penalty when addition is made on an estimated basis. Analysis: Issue 1: Penalty u/s 271(1)(c) - Concealment or furnishing inaccurate particulars of income: The case involved an appeal against the order of the Ld. CIT(A) confirming the penalty u/s 271(1)(c) imposed by the Assessing Officer (AO) due to alleged bogus purchases made by the assessee. The Ld. CIT(A) upheld the penalty, emphasizing the presence of inaccurate particulars due to the inability of the appellant to prove the genuineness of the purchases. Reference was made to the Supreme Court's ruling that MENS REA need not be proved for imposing the penalty. Despite arguments regarding the estimated basis of addition, the penalty was upheld based on the lack of primary documentation to establish the veracity of the purchases, leading to the conclusion that the appellant could not escape the penalty. Issue 2: Validity of penalty notice issued by Assessing Officer: The appellant contended that the penalty notice issued by the AO was in a printed form without specifying under which limb the penalty was proposed, raising concerns about the validity of the notice. However, the focus of the appeal primarily revolved around the substantive issue of the penalty u/s 271(1)(c) rather than the technical aspect of the notice. Issue 3: Applicability of penalty when addition is made on an estimated basis: The Tribunal noted that the AO levied the penalty on an estimation basis without concrete evidence of actual concealment. It was highlighted that the higher rate of profits estimated by the AO did not amount to concealment or furnishing inaccurate particulars of income. Relying on various decisions by High Courts and ITAT benches, the Tribunal concluded that when additions are made on an estimated basis, no penalty is sustainable. The Tribunal, after considering the series of judgments, held that there was no active concealment of income by the assessee, leading to the deletion of the penalty imposed by the AO and confirmed by the Ld. CIT(A). In the final decision, the Tribunal allowed the appeal filed by the assessee, deleting the penalty levied under section 271(1)(c) for the Assessment Year 2009-10.
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