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2025 (4) TMI 543 - AT - Income TaxLevy of penalty u/s 271(1)(c) - additions made by AO u/s 68 - HELD THAT - We are of the considered view that Ld. CIT(A) has correctly held that penalty cannot be imposed in case additions have been made on estimated basis. We further observe that in the following cases various courts have held that when income of the assessee is determined on an estimated basis no penalty under Section 271(1)(c) isa liable to be imposed for concealment of income or for furnishing inaccurate particular of income. We find no infirmity in the order of Ld. CIT(A) deleting the imposition of penalty u/s 271(1)(c) looking into the instant facts. Estimation of income - bogus purchases u/s 69A - HELD THAT -We note that CIT(A) has taken a consistent approach by following orders passed by his predecessor and as well as ITAT in which similar additions for other years were restricted to 5% of purchases.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment were: 1. Whether the Ld. CIT(A) erred in deleting the addition of Rs. 9,64,13,991/- made on account of bogus purchases under Section 69A of the Income Tax Act, 1961. 2. Whether the Ld. CIT(A) was justified in restricting the addition to 6% of the total bogus purchases instead of the 100% addition made by the Assessing Officer (AO). 3. Whether the Ld. CIT(A) erred in deleting the penalty levied by the AO under Section 271(1)(c) of the Income Tax Act, 1961, for claiming bogus purchases to suppress taxable income. ISSUE-WISE DETAILED ANALYSIS 1. Addition of Bogus Purchases under Section 69A Relevant Legal Framework and Precedents The legal framework involves Section 69A of the Income Tax Act, which pertains to unexplained money, investments, etc. The Department relied on precedents from the Gujarat High Court and the Calcutta High Court, which upheld the addition of 100% of purchases from bogus parties. Court's Interpretation and Reasoning The Tribunal noted that the Ld. CIT(A) had consistently applied a 5% addition to similar cases in previous years, aligning with the ITAT's decisions. The Tribunal found no reason to deviate from this consistent approach. Key Evidence and Findings The AO's findings were based on a search and seizure operation on the Rajendra Jain Group, revealing that the group provided accommodation entries for bogus purchases. The Ld. CIT(A) reduced the addition to 5% based on past Tribunal orders. Application of Law to Facts The Tribunal applied the principle of consistency, as the Ld. CIT(A) followed the ITAT's earlier orders, which restricted similar additions to 5% of purchases. Treatment of Competing Arguments The Department argued for a 100% addition based on the non-genuineness of transactions. However, the Tribunal upheld the Ld. CIT(A)'s decision, emphasizing the consistent application of a 5% addition in similar cases. Conclusions The Tribunal found no infirmity in the Ld. CIT(A)'s order restricting the addition to 5% of the purchases and dismissed the Department's appeal. 2. Deletion of Penalty under Section 271(1)(c) Relevant Legal Framework and Precedents Section 271(1)(c) of the Income Tax Act deals with penalties for concealment of income or furnishing inaccurate particulars. The Tribunal referenced various judgments where penalties were not imposed on estimated additions. Court's Interpretation and Reasoning The Tribunal agreed with the Ld. CIT(A) that penalties under Section 271(1)(c) are not applicable when additions are made on an estimated basis. Key Evidence and Findings The Ld. CIT(A) observed that penalties cannot be imposed on estimated additions, referencing the jurisdictional ITAT's decision in the appellant's own case for a previous year. Application of Law to Facts The Tribunal applied the principle that penalties are not applicable on estimated additions, as established in various court decisions. Treatment of Competing Arguments The Department argued for the imposition of penalties due to the alleged bogus purchases. However, the Tribunal upheld the Ld. CIT(A)'s decision to delete the penalty, emphasizing the precedent that penalties are not applicable on estimated additions. Conclusions The Tribunal found no infirmity in the Ld. CIT(A)'s order deleting the penalty under Section 271(1)(c), as the additions were based on estimates. SIGNIFICANT HOLDINGS Core Principles Established The Tribunal reinforced the principle of consistency in applying a 5% addition for bogus purchases, as previously decided by the ITAT. It also upheld the principle that penalties under Section 271(1)(c) are not applicable for estimated additions. Final Determinations on Each Issue The Tribunal dismissed both appeals filed by the Department, upholding the Ld. CIT(A)'s decisions to restrict the addition to 5% of purchases and to delete the penalty under Section 271(1)(c).
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