Penalty under section 271(1)(c) on bogus purchases not sustainable where AO applies adhoc profit estimation, no concealment.

Penalty under section 271(1)(c) was contested where the Assessing Officer made an adhoc restriction of the profit element in alleged purchases by applying a 15% gross profit estimate. The reasoning applied: an adhoc estimation of profit without conclusive proof of concealment or inaccurate particulars does not establish mens rea for penalty; identical precedents treating estimated profit rates as non-concealment were followed. Consequence: penal liability under the provision was not sustained because the disallowance arose from an assessment estimate rather than proof of deliberate concealment or false particulars.

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Issues Involved:
1. Deletion of penalty for alleged bogus purchases.
2. Genuineness of transactions and inability to produce parties for verification.
3. Alleged intention to reduce taxable income.
4. Applicability of the Supreme Court's decision in MAK Data (P) Ltd Vs CIT.
5. Basis for additions made from information received from the Sales Tax Department.
6. Compliance with CBDT's Instruction No. 3/2018.

Issue-wise Detailed Analysis:

1. Deletion of penalty for alleged bogus purchases:
The revenue contested the deletion of the penalty imposed on the assessee for alleged bogus purchases. The Assessing Officer (AO) had treated purchases amounting to Rs. 22,82,508 as non-genuine based on information from the Sales Tax Department, Maharashtra. The AO estimated the profit element from these purchases at 15% and levied a penalty under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income. The Ld.CIT(A) deleted the penalty, leading to the revenue's appeal. The Tribunal noted that penalty cannot be levied on an adhoc estimation, referencing similar cases where penalties were not upheld when profit elements were determined by estimation.

2. Genuineness of transactions and inability to produce parties for verification:
The revenue argued that the assessee failed to prove the genuineness of the purchases and could not produce the alleged bogus parties for verification during assessment and penalty proceedings. The Tribunal observed that the AO's estimation of profit on alleged non-genuine purchases was adhoc and did not constitute concrete evidence of concealment or furnishing inaccurate particulars. The Tribunal cited previous cases where penalties were not sustained due to lack of concrete evidence and reliance solely on third-party information without independent verification.

3. Alleged intention to reduce taxable income:
The revenue claimed that the assessee intended to reduce taxable income by claiming purchases from non-genuine parties. However, the Tribunal found that the AO's estimation of profit was not backed by concrete evidence of such intention. The Tribunal reiterated that penalty cannot be imposed based on estimated additions without substantial proof of concealment.

4. Applicability of the Supreme Court's decision in MAK Data (P) Ltd Vs CIT:
The revenue referenced the Supreme Court's decision in MAK Data (P) Ltd Vs CIT to support the penalty. The Tribunal, however, distinguished the present case, noting that the penalty in MAK Data was upheld due to clear evidence of concealment, whereas in the current case, the additions were based on adhoc estimation without concrete proof of concealment.

5. Basis for additions made from information received from the Sales Tax Department:
The revenue justified the additions based on information from the Sales Tax Department. The Tribunal acknowledged the information but emphasized that the AO did not conduct further independent investigations to substantiate the claims. The Tribunal referenced multiple cases where additions based solely on third-party information were not upheld, highlighting the need for independent verification.

6. Compliance with CBDT's Instruction No. 3/2018:
The revenue mentioned compliance with CBDT's Instruction No. 3/2018 for filing the appeal. The Tribunal did not find this instruction relevant to the substantive issue of penalty deletion and focused on the lack of concrete evidence for concealment.

Conclusion:
The Tribunal upheld the Ld.CIT(A)'s order deleting the penalty, emphasizing that penalties cannot be imposed based on adhoc estimations without concrete evidence of concealment or furnishing inaccurate particulars. The appeal of the revenue was dismissed.

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