2023 (8) TMI 585 - AT - Income Tax

Penalty u/s 271(1)(c) - Estimation of income on bogus purchases - AO held that GP rate of 12.5% should be estimated to factor the suppressed profit on bogus purchases made - HELD THAT - All the payments made have been through banking channels and there is no dispute regarding the quantitative statement of the purchases along with the bills and corresponding sales along with the copies of proceeding bills. None of these evidences or documents or the copies of sales bills or the quantitative details or the corresponding sales has been found to be incorrect or trading results have been disturbed. It is not a case that in the course of any enquiry conducted by the AO, parties have denied the transaction or it has been found that assessee has made these purchases outside the books. The sources of purchases are from the books and through banking channels and quantitative details of purchases have been accepted. Once the quantitative details of purchases and the corresponding quantitative sales have not been disturbed and has been accepted, then there cannot be any case for levy of penalty on account of alleged bogus purchases. Ultimately, the AO held that at the most there could be element of suppression of gross profit on the purchases, but such estimated addition alone cannot be the basis for levy penalty u/s. 271(1)(c), penalty proceedings being separate and distinct from the assessment proceedings and the assessee can explain on the basis of same material facts on record that he has not concealed any particulars of income or furnished any inaccurate particulars of income. The explanation of the Assessee and all the evidences filed before the authorities below have neither been rebutted nor has been found to be incorrect or assessee has failed to substantiate the explanation. Appeal of revenue dismissed.

Summary

Issues involved:
The judgment involves penalty proceedings under section 271(1)(c) for the assessment years 2009-10 and 2010-11 based on alleged bogus purchases made by the assessee.

Details of the Judgment:

Issue 1: Alleged Suppression of Purchases
The Revenue contended that the assessee suppressed particulars of purchases made in the grey market and disclosed inaccurate particulars of income. The penalty was imposed based on information from the Sales Tax Department of Maharashtra regarding alleged bogus purchases.

Issue 2: Penalty Imposed on Adhoc Estimate
The Assessing Officer levied a penalty under section 271(1)(c) on an adhoc estimate of gross profit at the rate of 12.5% on the alleged bogus purchases made by the assessee.

Judgment Details:
The assessee, a dealer in timber and wooden items, maintained proper records of all purchases and sales. The Assessing Officer estimated a gross profit rate of 12.5% on certain alleged bogus purchases, leading to the penalty imposition.

The CIT(A) deleted the penalty, emphasizing that penalty proceedings require a higher standard of evidence than assessment proceedings. The addition based on estimation alone cannot justify penalty imposition. Legal precedents were cited to support this position.

The Tribunal upheld the CIT(A)'s decision, noting that the assessee provided detailed evidence of purchases and sales, all conducted through banking channels. The explanation given by the assessee was not rebutted by the Assessing Officer during either the assessment or penalty proceedings.

Ultimately, the Tribunal confirmed the deletion of the penalty for both years, stating that the assessee had not concealed any income particulars or furnished inaccurate details. The penalty proceedings were deemed separate from the assessment proceedings, and the assessee's explanations were found to be substantiated by the evidence provided.

In conclusion, the appeal of the Revenue was dismissed, and the orders were pronounced in open court on 16th May 2023.