2022 (1) TMI 528 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - Bogus purchases - profit element at 5% of bogus purchases - HELD THAT - As relying on SHRI DEEPAK GOGRI 2017 (11) TMI 1857 - ITAT MUMBAI , HARIGOPAL SINGH 2002 (8) TMI 65 - PUNJAB AND HARYANA HIGH COURT and AERO TRADERS (P) LTD. 2010 (1) TMI 32 - DELHI HIGH COURT the income of the assessee is estimated on the value of alleged bogus purchases. Therefore, we direct the Assessing Officer to delete the penalty levied u/s. 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for inaccurate particulars of income and concealment of income.

Analysis:
1. The appeal was filed by the revenue against the order of the Learned Commissioner of Income-tax (Appeals) for partly deleting the penalty levied under section 271(1)(c) of the Act by the Assessing Officer. The case involved an individual, proprietor of a trading company engaged in the business of distributor and dealer in Engineering goods.

2. The Assessing Officer treated certain purchases as non-genuine based on information from the Sales Tax Department, Mumbai. The Assessing Officer completed the assessment by adding the amount of non-genuine purchases to the total income. On appeal, the addition was restricted by the Ld.CIT(A) and further reduced by ITAT to 5% of the alleged bogus purchases.

3. Subsequently, penalty proceedings were initiated by the Assessing Officer under section 271(1)(c) for furnishing inaccurate particulars of income and concealing income. The Ld.CIT(A) directed the Assessing Officer to levy the penalty on the suppressed income based on the ITAT order in the assessee's own case for the assessment years 2010-11 and 2011-12.

4. During the appeal, the counsel for the assessee argued that penalty cannot be imposed on adhoc estimations. The Department, through the Ld. DR, supported the Assessing Officer's orders.

5. The Tribunal observed that penalty cannot be levied on adhoc estimations. It noted that in similar cases, penalties were not leviable when profit estimations were made on an adhoc basis. The Tribunal directed an adhoc estimation of 5% in the present case.

6. Citing precedents, the Tribunal highlighted that concealment of income or furnishing inaccurate particulars must be proven for penalty under section 271(1)(c) to apply. The Tribunal emphasized that in cases of estimated income, penalties were not justified as there was no positive act of concealment.

7. Relying on decisions from various High Courts, the Tribunal concluded that applying estimated profit rates on turnover does not amount to concealment or furnishing inaccurate particulars. Therefore, the Tribunal directed the Assessing Officer to delete the penalty levied under section 271(1)(c) in the given case.

8. Consequently, the appeal of the revenue was dismissed, and the Tribunal ordered the deletion of the penalty.