2023 (8) TMI 214 - AT - Income Tax

Penalty u/s. 271(1)(c) - estimation of gross profit rate @12.5% on the alleged bogus purchases - HELD THAT - Once the source of the purchases are from the books, payments have been made through banking channels along with the copy of delivery challans and here in particular case, assessee also produced stock register and also quantities the details of purchases, corresponding sales, therefore it cannot be held that the purchases were non genuine or any kind of penalty for furnishing of inaccurate particular sales can be levied on estimated GP rate of 12.5%. Nothing has been proved beyond doubt as alleged by the Ld. CIT(A), that assessee was indulged in availing accommodation entry of bogus purchases. Addition has been made on some estimate of profit element embedded in such purchases and therefore, on such adhoc estimate of GP rate, penalty u/s. 271(1)(c) is not warranted, especially when assessee has produced all the details and documentary evidences of purchases and corresponding sales and there is no tinkering with the trading result and overall gross profit have been accepted - Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves penalty proceedings under section 271(1)(c) for the assessment years 2009-10 and 2010-11, based on estimation of gross profit rate on alleged bogus purchases made by the assessee.

Penalty Proceedings for AY 2009-10 & 2010-11:
The assessee, engaged in trading of ferrous and non-ferrous metals, was penalized for alleged bogus purchases made from certain parties. The Assessing Officer (AO) estimated gross profit rates on unproved purchases, resulting in penalties of Rs. 1,65,134/- for AY 2009-10 and Rs. 43,021/- for AY 2010-11.

Assessee's Submissions and Evidence:
The assessee submitted various documents and explanations to prove the genuineness of purchases, including purchase bills, ledger accounts, delivery challans, bank statements, and audited books of accounts. The stock register was also produced, showing no discrepancies in the trading results or overall gross profit.

Decision and Rationale:
The Appellate Tribunal found that the penalty was based on an adhoc estimate of gross profit rate without independent verification by the AO. As the purchases were supported by proper documentation, payments through banking channels, and detailed stock records, the Tribunal held that the penalty for furnishing inaccurate particulars of income was unwarranted. The addition was deemed to be an estimate of profit embedded in the purchases, not conclusive evidence of bogus transactions. Consequently, the penalties levied by the AO and confirmed by the CIT(A) were deleted for both assessment years.

Conclusion:
The ground raised by the assessee was allowed, and the appeals were consequently allowed. The judgment was pronounced in open court on 10th May 2023.