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2023 (2) TMI 1058 - AT - Income TaxPenalty u/s 271(1)(c) - GP estimation - Bogus Purchases - HELD THAT - As decided in decision of M/s. Fancy Diamonds India Pvt. Ltd. 2022 (6) TMI 1359 - ITAT MUMBAI which has held that in case where the addition is made on estimated basis, the penalty u/s. 271(1)(c) of the Act is not leviable. In the present case in hand, it is observed that the A.O. has made addition @ 2.58% 3% on VAT which was restricted by the ld. CIT(A) to 2.58% of gross profit on the bogus purchases made by the assessee with the hawala parties. This clearly indicates that the addition in assessee s case was made on estimated basis. The penalty u/s. 271(1)(c) of the Act cannot be levied where the addition is made on estimated basis. From the above observation we hereby delete the penalty levied by the A.O. and find no justification in the order of the ld. CIT(A). - Decided in favour of assessee.
Issues involved:
Challenge to penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2010-11 and 2011-12. Analysis: 1. The appeals were filed by the assessee against the penalty levied by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals) under section 271(1)(c) of the Act for the respective Assessment Years. 2. The key issue in both appeals was the challenge to the penalty imposed on the assessee for concealment of income related to alleged bogus purchases from hawala parties. The penalty amounts were Rs.1,10,781/- and Rs.46,116/- for the two years, respectively. 3. In the absence of representation from the assessee, the Tribunal proceeded to hear the Departmental Representative and examined the available records to make a decision. 4. The assessee, a reseller in the trading business, had its income tax return processed under section 143(1) for the relevant years. The case was reopened based on findings by the Sales Tax Department regarding alleged bogus purchases by the assessee from hawala parties. 5. During assessment proceedings, the assessee failed to substantiate the genuineness of the purchases, leading to the Assessing Officer making additions to the income on an estimated basis. 6. The Commissioner of Income Tax (Appeals) upheld the penalty imposed under section 271(1)(c) for concealment of income. The penalty was challenged by the assessee on grounds related to inaccurate particulars and concealment of income. 7. The Tribunal noted that the penalty was levied based on estimated additions made by the Assessing Officer, which was not justifiable as per various judicial precedents. The penalty was challenged on the basis that it cannot be levied when additions are made on an estimated basis. 8. Relying on previous decisions, the Tribunal concluded that penalties under section 271(1)(c) cannot be imposed when additions are made on an estimated basis. The Tribunal, therefore, deleted the penalties imposed by the Assessing Officer and disagreed with the decision of the Commissioner of Income Tax (Appeals). 9. Consequently, the appeals filed by the assessee for both Assessment Years were allowed, and the penalties under section 271(1)(c) were deleted. 10. The Tribunal pronounced its decision on both appeals on 24.01.2023, allowing the appeals and deleting the penalties imposed on the assessee.
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