Tax Penalty Appeal Allowed: Incorrect Income Particulars Penalty Deleted

The appeal against the confirmation of penalty under section 271(1)(c) for furnishing inaccurate particulars of income was allowed. The Tribunal noted that the penalty was imposed only on the estimated addition of purchases made through certain parties. It was held that only the gross profit on such purchases should be disallowed if sales were not disputed. Relying on previous Tribunal decisions and High Court rulings, the penalty on the estimated addition was directed to be deleted. Consequently, the appeal of the assessee was allowed, and a related appeal with identical facts and circumstances was also allowed.

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Issues:
Confirmation of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
The appeals were filed against orders of the Commissioner of Income-tax (Appeal)-2 and the National Faceless Appeal Centre for different assessment years. The lead case was chosen for convenience as common issues were involved. The main ground of the appeal was the confirmation of penalty under section 271(1)(c) for inaccurate particulars of income. Initially, the appeal was dismissed due to non-compliance by the assessee. However, a miscellaneous application was later filed citing the demise of a close relative as the reason for non-compliance, and it was allowed, recalling the previous order under rule 24 of the Income-tax (Appellate Tribunal) Rules, 1963.

During the assessment proceedings, the Assessing Officer disallowed 100% of purchases made through three parties based on information that these parties provided bills without supplying goods. The Commissioner estimated the quantum addition at 12.5% of purchases. Subsequently, a penalty of Rs.8,13,793 was levied under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee appealed against this penalty, which was dismissed by the Commissioner.

Upon review, the Tribunal noted that the penalty was imposed only on the estimated addition. It was observed that if sales were not disputed, the entire alleged bogus purchases cannot be disallowed, and only the gross profit on such purchases should be disallowed. Citing previous Tribunal decisions and High Court rulings, including those from Rajasthan, Punjab & Haryana, and Gujarat, it was directed that the penalty on the estimated addition should be deleted. Consequently, the appeal of the assessee was allowed.

In another related appeal, the decision from the lead case was applied due to identical facts and circumstances. As a result, both appeals filed by the assessee were allowed. The order was pronounced in the open court on 22/02/2023.

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