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TMI Blog2018 (10) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... gross margins earned from sale against purchase from party alleged to be non-genuine. An addition which is made purely on an estimate basis, it cannot be said there is concealment of income. 4. The Id CIT(A) erred in confirming the order of Assessing Officer imposing penalty under section 271(l)(c) without appreciating that the penalty notice issued by the assessing officer dated 08/03/2015 is defective. Without prejudice to above 5. erred in ignoring the fact that the assessee has suffered loss in the relevant year and even after the addition the income assessed was loss Rs. 28,49,154/-. As such there was no loss to revenue, therefore no penalty ought to have been levied." 2. The brief facts of the case are that the assessee is engaged in the business of trading in chemicals and also dealing in shares & securities, filed his return of income for AY 2009-10 on 30-09-2009 declaring total income of Rs. 15,90,000. The case was selected for scrutiny and the assessment was completed u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 determining the total income at Rs. 15,90,000 by making addition towards 25% gross profit on alleged bogus purchase made from hawala dealers. Therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not done by the Assessing Officer, the wrongful claim by the assessee in respect of the above bogus purchases would have gone undetected and the assessee would have succeeded in concealing his income to the extent of Rs. 10,03,180/-. Thus, the assessee has not only furnished inaccurate particulars of income thereby concealing the particulars of its income but also failed to furnish explanation in support of its claim of Hawala Purchases. 6. Section 271(1 )(c) of the Act provides for the levy of penalty in cases where the AO is satisfied that any person had concealed particulars of his income or had furnished inaccurate particulars of such income. Also, Explanation I to Section 271(1) provides that where in respect of any facts material to the computation of the total income of any person, such person fails to offer an explanation or offers on explanation which is found to bp false or he offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide mid that all the facts relating to the same and are material to the computation of the total income of the person, have been disclosed by him, then the amount added or disallowed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has failed to offer any explanations in respect of addition made by the AO towards alleged bogus purchases from hawala operators. Therefore, he opined that the AO was right in levying penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. The relevant observations are as under:- "5.9 The ^O completed the assessment for the relevant AY and initiated penalty proceedings u/s 271(l)(c) of the Act for furnishing inaccurate particulars of income, """he AO had received information from the Sales Tax Department through C3IT(Inv), Mumbai that the appellant had obtained bogus purchase bills of Rs. 38,92,720/- from various hawala dealers during the relevant AY. The AO has therefore made additions of Rs. 10,03,ISO/- to the total income of the appellant being bogus purchases. The AO has stated that the appellant could not substantiate the genuineness of the purchase transactions and could not produce the suppliers before the assessing officer for verification. Moreover, the hawala parties had admitted in front of the Sales Tax Department that they have not made any sales or purchase transactions. The AO has thus concluded that the appellant had furnished inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of estimation of gross profit on alleged bogus purchases in the light of facts gathered during the course of assessment proceedings coupled with report of sales-tax department. According to the AO, the purchases from certain parties were not genuine which is evident from the fact that the assessee failed to furnish complete details of purchases from the above parties. The assessee also failed to produce the parties in person before the AO. Therefore, he opined that it is a clear case of furnishing of inaccurate particulars of income which warrants levy of penalty u/s 271(1)(c) and accordingly levied penalty under Explanation 1 to section 271(1)(c). 7. The assessee has not challenged addition made by the AO towards estimation of gross profit on alleged bogus purchases. The assessee claims that it has accepted addition made by the AO considering the fact that even after disallowance of gross profit on alleged bogus purchases, income from business in the year continued to be net loss, therefore, he was under the bona fide belief that penalty provisions for concealment of particulars of income u/s 271(1)(c) will not attract. The assessee further contended that when he has agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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