2024 (5) TMI 221 - AT - Income Tax

Penalty levied u/s 271(1)(c) - estimation of income on bogus purchases - addition to an extent of 12.5% of the total suspicious purchases - CIT(A) deleted penalty levy - HELD THAT - We find that the coordinate bench of the Tribunal in Mun Gems 2024 (1) TMI 209 - ITAT MUMBAI held that ad hoc GP rate applied on alleged bogus purchases to factor in the suppression of alleged gross profit could not be the basis of levying penalty for furnishing of inaccurate particulars of income or concealing particulars of income. Thus the impugned order deleting the penalty levied under section 271(1)(c) of the Act is upheld. As a result, grounds raised by the Revenue are dismissed.

Summary

Issues:
The judgment involves the condonation of delay in filing the appeal, challenge against the deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961, and the basis for levying penalty for furnishing inaccurate particulars of income or concealing particulars of income.

Condonation of Delay:
The appeal was delayed by 33 days, and the Revenue sought condonation citing internal restructuring and transfer of case records as reasons for the delay. The Tribunal found sufficient cause for the delay and thus condoned the delay in filing the appeal.

Deletion of Penalty u/s 271(1)(c):
The Revenue challenged the deletion of penalty imposed under section 271(1)(c) of the Act. The AO had treated purchases as non-genuine due to lack of vendor replies, resulting in an addition of 12.5% of suspicious purchases. However, the Tribunal held that since the assessee disclosed a Gross profit on bogus purchases of 2.55%, an estimation of profit @10% was deemed sufficient. The penalty was levied separately, but the CIT(A) deleted it based on the ad hoc nature of the addition, following the Tribunal's decisions. The Tribunal upheld the deletion, stating that the penalty could not be sustained on an ad hoc estimate basis.

Basis for Levying Penalty:
The Tribunal referred to a previous case where it was held that applying an ad hoc GP rate on alleged bogus purchases to factor in the suppression of gross profit could not be the basis for levying penalty for inaccurate particulars of income or concealing income. The Tribunal emphasized that penalty based on such ad hoc estimates cannot be sustained, leading to the deletion of the penalty in the present case. The decision was made in line with the findings of the coordinate bench, and the grounds raised by the Revenue were dismissed accordingly.

In conclusion, the Tribunal dismissed the appeal by the Revenue, upholding the deletion of the penalty u/s 271(1)(c) based on the ad hoc nature of the addition and the precedent set by previous decisions of the Tribunal.