Tribunal upholds deletion of penalty under Income Tax Act for lack of conclusive proof

The tribunal upheld the decision of the Learned Commissioner of Income Tax (Appeals) to delete the penalty imposed under Section 271(1)(c) of the Income Tax Act. The tribunal found that the Assessing Officer had made an ad-hoc estimation of profit without conclusive proof of concealment or inaccurate particulars, in line with established legal precedent. The appeal by the revenue was dismissed on 13th March 2020.

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Issues Involved:
1. Justification of deleting the penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Assessment of non-genuine purchases and furnishing of inaccurate particulars of income.

Detailed Analysis:

1. Justification of Deleting the Penalty Levied under Section 271(1)(c):
The primary issue revolves around whether the Learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)] was justified in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act. The revenue argued that the Ld.CIT(A) did not properly appreciate the decisions of the Hon'ble Apex Court in the case of Mak Data Pvt. Ltd. Vs CIT and the Hon'ble Gujarat High Court's decision in the case of N. K. Proteins Ltd., where penalties were upheld in similar circumstances. The department received specific credible information from the Sales Tax Department of Maharashtra regarding non-genuine purchases, which led to the penalty imposition.

The tribunal examined the facts and noted that the Assessing Officer had made an ad-hoc estimation of the profit element in the purchases at 12.5%, based on the information from the Sales Tax Department and the inability of the assessee to produce the parties or establish the movement of goods. The tribunal reiterated the settled position of law that penalty cannot be levied when an ad-hoc estimation is made. It cited the Coordinate Bench's decision in the case of Shri Deepak Gogri v. Income Tax Officer, where it was held that no penalty is leviable on such estimations as there is no concealment of income or furnishing of inaccurate particulars.

2. Assessment of Non-Genuine Purchases and Furnishing of Inaccurate Particulars of Income:
The revenue contended that the Ld.CIT(A) failed to appreciate that there was a definite finding in the assessment order regarding bogus purchases and furnishing inaccurate particulars of income, leading to the concealment of income. The tribunal reviewed similar cases, such as DCIT v. Manohar Manak Alloys Pvt. Ltd., where penalties were imposed based on estimated additions from bogus purchases without concrete evidence. In these cases, the tribunal held that penalties could not be imposed on estimated additions, as there was no positive act of concealment by the assessee.

The tribunal also referenced the Hon'ble Punjab & Haryana High Court's decision in Harigopal Singh v. CIT, which held that penalties under Section 271(1)(c) are not attracted in cases where income is assessed on an estimate basis. The court emphasized that there must be a positive act of concealment, which was not evident in this case. Similarly, the Hon'ble Delhi High Court in CIT v. Aero Traders Pvt. Ltd. affirmed that estimated rates of profit do not amount to concealment or furnishing inaccurate particulars.

Conclusion:
The tribunal concluded that the Assessing Officer had only estimated the Gross Profit on the alleged non-genuine purchases without any conclusive proof of concealment of income or furnishing inaccurate particulars. Therefore, it found no infirmity in the Ld.CIT(A)'s order deleting the penalty under Section 271(1)(c) of the Act. The grounds raised by the revenue were rejected, and the appeal was dismissed.

Final Judgment:
The appeal of the revenue was dismissed, and the order pronounced in the open court on the 13th March 2020.

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