Assessee wins penalty appeal for A.Y. 2009-10 & 2011-12 due to higher declared profit.

The ITAT Mumbai ruled in favor of the assessee, deleting penalties under section 271(1)(c) for A.Y. 2009-10 and A.Y. 2011-12. The Tribunal found that the estimated additions on account of bogus purchases did not warrant the imposition of penalties as the gross profit declared was higher than the estimated profit. Therefore, penalties were deemed unjustified in both assessment years, leading to their deletion.

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Issues:
Levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 in relation to estimated addition made on account of bogus purchases.

Analysis:
In the present case, the appeals before the ITAT Mumbai pertained to the imposition of penalty u/s.271(1)(c) of the Income Tax Act, 1961, for A.Yrs. 2009-10 & 2011-12. The primary issue to be decided was whether the ld. CIT(A) was justified in confirming the penalty in respect of estimated addition made on account of bogus purchases. The Tribunal considered both appeals together due to identical issues involved.

For the A.Y. 2009-10, the assessee had filed the return of income declaring total income of Rs. 4,32,63,690. The assessment was framed determining total income at Rs. 5,38,92,820, with a disallowance on account of bogus purchases. The Tribunal had earlier restricted the disallowance to 12.5% of bogus purchases after considering the profit element. The Tribunal noted that the addition was made on an estimated basis and held that no penalty u/s.271(1)(c) would be justified. The Tribunal also observed that the gross profit declared by the assessee was higher than the estimated profit, leading to the deletion of the penalty for A.Y. 2009-10.

Regarding A.Y. 2011-12, the Tribunal found that the gross profit rate declared by the assessee was also higher than the percentage directed by the Tribunal. Consequently, the Tribunal concluded that it was not a suitable case for the imposition of the penalty u/s.271(1)(c) for this assessment year as well. Therefore, the penalty for A.Y. 2011-12 was also directed to be deleted.

In conclusion, the Tribunal allowed both appeals of the assessee, emphasizing that the penalties under section 271(1)(c) were not warranted in the circumstances of the case for both A.Y. 2009-10 and A.Y. 2011-12. The order was pronounced on 13/09/2021, and the penalties were directed to be deleted for both assessment years.

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