2024 (8) TMI 79 - AT - Income Tax

Penalty u/s 271(1)(c) - estimation of income of bogus purchases - additions made on estimated basis on account of difference in gross profit margin from sales against purchases from the party alleged to be non-genuine - HELD THAT - In the case of the assessee the supporting material of the assessment order was furnished however the addition on estimation basis of 12.5% of the purchase amount was made on the ground of extra profit earned by the assessee on such purchases because the parties were involved in issuing accommodation bills of purchases as per the information supplied by the Sales Tax Department. It is clear that in the case of the assessee the addition was made on estimation basis therefore following the decision of ITAT in JATIN ENTERPRISES VERSUS ACIT-19 (2) , MUMBAI 2024 (3) TMI 1073 - ITAT MUMBAI we consider that penalty levied in the case of the assessee on estimated addition is not sustainable. Therefore, the penalty levied is deleted. Accordingly, both the grounds of appeal of the assessee are allowed.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) by the CIT(A) NFAC.
2. Alleged non-genuine purchases leading to penalty imposition.

Analysis:
1. The appeals were against the CIT(A) NFAC's orders for Assessment Years 2009-10 to 2011-12. The ITAT adjudicated all appeals together, considering similar issues. The lead case was ITA No. 4402/Mum/2023.

2. The case involved the assessee's non-genuine purchases flagged by the Sales Tax Department. The assessing officer reopened the case under section 147 and added a profit element to the income. Penalty proceedings under section 271(1)(c) were initiated, resulting in a penalty of Rs. 2,18,350 levied by the AO.

3. The CIT(A) upheld the penalty, leading to an appeal by the assessee. The assessee argued that the penalty lacked legal basis as there was no proof of income concealment. Reference was made to a similar ITAT decision in the case of Jatin Enterprises Vs. ACIT.

4. The ITAT reviewed the material and submissions. The assessing officer estimated a profit element on non-genuine purchases. Despite the assessee providing purchase details and supporting documents, the AO disagreed. The ITAT noted the CIT(A) decision in a similar case and deleted the penalty, citing that penalties on estimated additions are unsustainable.

5. Consequently, the penalty on the estimated addition was deemed unsustainable, and the penalty was deleted. The ITAT allowed the assessee's appeal in all three cases (AY 2009-10 to 2011-12).

This comprehensive analysis highlights the legal journey and reasoning behind the ITAT's decision to delete the penalty imposed under section 271(1)(c) in the cited judgment.