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TMI Blog2024 (5) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty under section 271(1)(c) of the Act levied on additions made purely on estimation is not sustainable - See SUBHASH TRADING COMPANY [ 1995 (11) TMI 37 - GUJARAT HIGH COURT] , NAVJIVAN OIL MILLS. [ 2001 (7) TMI 81 - GUJARAT HIGH COURT] , BOMBAYWALA READYMADE STORES [ 2014 (11) TMI 1099 - GUJARAT HIGH COURT] and SANGRUR VANASPATI MILLS LTD. [ 2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] Thus we hold that penalty u/s 271(1)(c) of the Act is not sustainable in the present case - Decided in favour of assessee. - Shri Pawan Singh, Judicial Member And Shri Bijayananda Pruseth, Accountant Member For the Assessee : Shri Ketan Shah, AR For the Revenue : Shri Ritesh Mishra, CIT(DR) ORDER PER BIJAYANANDA PRUSETH, AM: These two appeals by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rat) and Commissioner of Income Tax vs S. P. Bhatt [1974] 97 ITR 440 (Guj.) 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty levied by the AO u/s 271(1)(c) of the Act of Rs. 2,27,98,500/- without appreciating the fact that the Assessing Officer has correctly held that the assessee has failed to substantiate the transactions claimed in its return of income thereby evaded taxes to that extent. 4. On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in not appreciating the fact that the act of assessee clearly falls within the ambit of provisions of Explanation 1 to section 271(1)(c) of the Act as the assessee had failed to offer an explanation or which was found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty order based on the order of Ld. CIT(A) wherein disallowance of bogus purchases to the extent of 12.5% of the bogus purchases were sustained. The said addition was Rs. 6,72,44,350/-, while levying the penalty, the AO has held that the assessee had knowingly and deliberately furnished inaccurate particulars of income to the extent of Rs. 6,72,44,350/- to reduce his taxable income. He levied penalty at the rate of 100% of tax sought to be evaded amounting to Rs. 2,27,98,500/-. 3. Aggrieved by the aforesaid penalty order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The Ld.CIT(A) in his order under section 250 of the Act dated 25.09.2023 has deleted the penalty levied by the AO. In the said order, the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income to the extent of Rs. 6,72,54,350/-. 5. On the other hand, Learned Authorized Representative (Ld. AR) of the assessee has strongly relied from the order of the ld. CIT(A). He argued that both the addition as well as subsequent confirmations by the Ld. CIT(A) and order of ITAT are based on estimation. The AO disallowed 25% of the bogus purchase, which was subsequently reduced to 12.5% by the Ld. CIT(A). On further appeal, the ITAT has reduced the addition to 6% of the disputed purchases. No penalty can be levied due to additions based on estimation. 6. We have carefully heard the submission made by the rival sides and examined the orders of the lower authorities. Undisputedly, the addition made on account of bogus purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal position that penalty under section 271(1)(c) of the Act levied on additions made purely on estimation is not sustainable. Such a view has been taken by the Hon ble jurisdictional High Court in the case of CIT vs Subhas Trading Co. (1996) 86 Taxman 30 (Guj.), Navjivan Oil Mills vs CIT (2002) 124 Taxman 392 (Guj), CIT vs Valimkbhai H. Patel (2006) 280 ITR 487 (Guj) and ITO vs Bombaywala Readymade Stores (2015) 55 taxmann.com 258 (Guj.). Similar view has also been taken by other Hon ble High Courts in CIT vs Krishi Tyre Retreading and Rubber Industries, 360 ITR 580 (Raj.) and CIT vs. Sangur Vanaspati Mills Ltd., 303 ITR 53 (P H). Respectfully following the decisions cited supra, we hold that penalty u/s 271(1)(c) of the Act is not susta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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