2023 (10) TMI 511 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - gross profit estimated @ 5% on alleged unproved purchases - HELD THAT - Appellate authorities have found that at the most there could be element of suppression of gross profit on the purchases, but such estimated addition alone cannot be the basis for levy penalty u/s.271(1)(c). The penalty proceedings being separate and distinct from the assessment proceedings and the assessee can explain on the basis of same material facts on record that he has not concealed any particulars of income or furnished any inaccurate particulars of income. The explanation of the Assessee and all the evidences filed before the authorities below have neither been rebutted nor has been found to be incorrect or assessee has failed to substantiate the explanation. Thus, levy of penalty on such estimated gross profit cannot be sustained and accordingly, in all the years penalty levied by the AO and sustained by the CIT(A) is directed to be deleted. Appeal of assessee allowed.

Summary

Issues involved:
The appeals were filed against penalty proceedings u/s. 271(1)(c) for various assessment years based on estimated gross profit on alleged unproved purchases.

AY 2004-05, 2005-06, 2007-08:
The assessments were reopened due to survey action revealing accommodation purchase bills, leading to addition of entire purchases as unexplained investment u/s. 69C. The Tribunal restricted the addition by estimating gross profit @ 5% on unproved purchases.

AY 2008-09, 2009-10:
Regular assessments were made based on similar observations, adding entire purchases as unexplained investment u/s. 69C. The Tribunal confirmed the addition by estimating gross profit @ 5% on alleged unproved purchases.

Penalty Proceedings:
The AO levied penalty on estimated profit of 5% of disputed purchases. Assessee's explanation and submissions were based on the genuineness of purchases, supported by various documents. The explanation was rejected, leading to the levy of penalty u/s. 271(1)(c).

Judgment:
The Tribunal found that the penalty was levied solely on estimated gross profit without concrete evidence of concealment. The Assessee's detailed submissions and supporting documents were accepted, showing genuine transactions. The Tribunal concluded that the penalty on estimated gross profit could not be sustained, and directed deletion of penalties for all assessment years.

Separate Judgment:
The appeals of the Assessee were allowed, with penalties levied by the AO and sustained by the CIT(A) directed to be deleted.