2024 (5) TMI 103 - AT - Income Tax

Penalty u/s 271(1)(c) - Estimation of income - bogus purchases - during the assessment, the addition was made on estimation @ 25% of the disputed purchase - In first appeal, the addition was restricted to 12.5% and on second appeal to the Tribunal, it was further reduced to 6% of the disputed purchases - HELD THAT - The entire addition right from the assessment stage to the Tribunal was merely on estimation and there is no definite findings on the quantum of concealment of income by the assessee. It is accepted legal position that penalty under section 271(1)(c) of the Act levied on additions made purely on estimation is not sustainable - See SUBHASH TRADING COMPANY 1995 (11) TMI 37 - GUJARAT HIGH COURT , NAVJIVAN OIL MILLS. 2001 (7) TMI 81 - GUJARAT HIGH COURT , BOMBAYWALA READYMADE STORES 2014 (11) TMI 1099 - GUJARAT HIGH COURT and SANGRUR VANASPATI MILLS LTD. 2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT Thus we hold that penalty u/s 271(1)(c) of the Act is not sustainable in the present case - Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in this case include penalties levied u/s 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2008-09 and 2009-10, related to bogus purchases and concealment of income.

Issue 1: Penalty Under Section 271(1)(c) - AY 2009-10
The Revenue appealed against the deletion of penalties by the Ld. CIT(A) for penalties levied u/s 271(1)(c) for AY 2009-10, citing the assessee's claim of bogus purchases to suppress taxable income. The AO held the assessee liable for penalty under this section, which was contested by the appellant.

Details: The AO disallowed a portion of the claimed purchases, leading to penalty proceedings. The Ld. CIT(A) and ITAT reduced the disallowance percentages, with the Ld. CIT(A) ultimately deleting the penalty. The Ld. CIT(A) reasoned that the additions were based on estimation and not deliberate concealment, citing relevant tribunal decisions.

Issue 2: Penalty Under Section 271(1)(c) - AY 2008-09
Similar to the AY 2009-10 case, penalties were levied and subsequently deleted by the Ld. CIT(A) for AY 2008-09. The grounds of appeal and arguments presented were akin to those in the AY 2009-10 case, resulting in the dismissal of the Revenue's appeal.

Details: The facts and circumstances of the AY 2008-09 case mirrored those of AY 2009-10, with penalties being contested based on estimation of additions rather than deliberate concealment.

Judgment Summary:
The Tribunal upheld the decisions of the Ld. CIT(A) in both AY 2008-09 and 2009-10 cases, dismissing the appeals by the Revenue. The Tribunal emphasized that penalties based on estimated additions without concrete evidence of deliberate concealment are not sustainable u/s 271(1)(c) of the Act. The decisions were supported by legal precedents and the assessment process leading to the estimation of additions.