Penalty quashed for alleged bogus purchases under Income Tax Act.

The tribunal quashed the penalty imposed under section 271(1)(c) of the Income Tax Act for Assessment Years 2010-11 and 2011-12. The assessee successfully argued that the alleged bogus purchases were genuine, supported by proper documentation and payments through banking channels. As the addition to income was based on estimation and not concrete evidence, the tribunal ruled that penalties cannot be imposed in such cases, in line with legal precedents. Consequently, both appeals by the assessee were allowed, leading to the cancellation of the penalty.

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Issues involved: Challenge to penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2010-11 and 2011-12.

Summary:

Issue 1: Penalty under section 271(1)(c) of the Act
The assessee filed its return of income, which was later scrutinized, resulting in an addition to the total income due to alleged bogus purchases. A penalty was imposed under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee appealed the penalty imposition, arguing that purchases were genuine, supported by ledger accounts, bills, and delivery challans. The assessee also highlighted that payments were made through banking channels. The Revenue contended that the assessee failed to provide evidence to prove the genuineness of the transactions. The tribunal noted that the addition was based on an estimation of alleged bogus purchases and held that penalties cannot be levied in cases of additions made on an estimated basis, citing relevant legal precedents. Consequently, the penalty under section 271(1)(c) was quashed.

Separate Judgement:
Both appeals filed by the assessee challenging the penalty imposition were allowed, and the penalty under section 271(1)(c) was quashed.

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