2024 (6) TMI 102 - AT - Income Tax

Penalty u/s 271(1)(c) - estimation of income on bogus purchases - addition as made being 6% held as unproved/unexplained purchases - HELD THAT - It is a settled position that on the addition /disallowance made on an estimate basis no penalty u/s. 271(1)(c) is leviable. For the purpose of levying penalty under 271(1)(c) AO has to clearly prove that the assessee has concealed the particulars of his income or has furnished inaccurate particulars of his income. Considering the undisputed fact that addition on which the penalty has been imposed is on an estimate basis i.e. 6% of bogus purchases we are of the view that penalty so imposed u/s. 271(1)(c) is not justified. Accordingly we delete the penalty imposed on the assessee. Thus the ground no.1 taken by the assessee is allowed.

Summary

Issues involved: The appeal challenges the imposition of penalty u/s. 271(1)(c) of the Income-tax Act based on estimated addition sustained on alleged bogus purchases.

Summary:
The appeal was filed against the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi, upholding the penalty imposed u/s. 271(1)(c) of the Act. The case involved the assessment year 2010-11 and the imposition of a penalty of Rs. 1,54,250.

The assessee's return of income was initially reported at Rs. 12,710. Subsequently, the assessment was reopened u/s. 147 based on information regarding accommodation bills for purchases through parties declared as hawala operators. An addition of Rs. 10,13,496 was made, leading to penalty proceedings u/s. 271(1)(c).

In the quantum appeal, the addition was reduced to Rs. 4,86,478 by adopting 6% on unproved purchases. The penalty of Rs. 1,54,250 was imposed, which was challenged before the Tribunal.

During the proceedings, the assessee argued that the addition was based on estimation and there was no concealment or inaccurate filing of income particulars. The authorities contended that the addition was due to the lack of substantiating documents.

The Tribunal noted that on an estimate basis, no penalty u/s. 271(1)(c) is justified unless there is clear proof of concealment or inaccurate particulars. As the addition was based on estimation, the penalty was deemed unjustified and deleted.

The Tribunal allowed the appeal, stating that the penalty was not warranted in this case. The legal issue regarding the defective notice for initiating penalty proceedings was left open as the penalty was already deleted.

In conclusion, the appeal of the assessee was allowed, and the penalty imposed was deleted.