2023 (5) TMI 152 - AT - Income Tax

Penalty u/s 271(1)(C) - addition of GP rate on bogus purchases - Addition on certain information received from Sales Tax authorities that assessee had made purchases from various suspicious parties - HELD THAT - We find that the assessee had filed all the details of purchases and corresponding sales had not been doubted. The sources of purchases are from the books and overall trading results have been accepted. Only allegation is that assessee has taken accommodation bills for the purchase of items to suppress the profits. Once, the addition has been made on adhoc and estimate which has been reduced by the Tribunal, then it cannot be held that there is any concealment of income so as to warrant any penalty u/s 271(1)(c), Accordingly, on merits the penalty is deleted. Decided in favour of assessee.

Summary

Issues involved: Penalty proceedings u/s 271(1)(c) for AY 2009-10, 2010-11 & 2011-12 based on adhoc addition of GP rate on bogus purchases.

AY 2009-10 & 2011-12:
The Assessing Officer applied a GP rate of 12.5% on bogus purchases, confirmed by Ld. CIT (Appeals). Tribunal reduced the addition, estimating a GP rate of 5%. Assessee's details of purchases were accepted, with no doubts on corresponding sales. Tribunal held that adhoc addition did not indicate income concealment, leading to deletion of penalty u/s 271(1)(c).

AY 2010-11:
Penalty proceedings pending, although hearing concluded. No concealment of income found due to reduced adhoc addition, leading to likely deletion of penalty.

In AY 2009-10, Ld. CIT(A) deemed the appeal as time-barred, dismissed it by 3563 days. Assessee faced financial distress, impacting ability to file appeal in time. Despite delay, considering penalty deletion on merits, dismissal on grounds of delay was rejected, and the appeal was allowed.