Penalty under Section 271(1)(c) unsustainable when CIT(A) makes ad hoc disallowance without proving concealment

ITAT Mumbai held that penalty u/s 271(1)(c) was unsustainable where CIT(A) made ad hoc disallowance of 15% of alleged bogus purchases treated as unexplained income u/s 69C. The assessee-trader had furnished necessary details including bills, vouchers, banking channel payments and bank statements to AO. Tribunal distinguished the case from N.K. Industries Ltd where purchases were found bogus. Since coordinate bench restricted addition to 20% instead of AO's 100% addition, penalty was unjustified. Revenue failed to establish concealment of income or filing of inaccurate particulars as assessee cooperated fully during assessment proceedings. Appeal allowed.

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Issues:
1. Disallowance of alleged bogus purchases under section 69C of the Income Tax Act, 1961.
2. Imposition of penalty under section 271(1)(c) for concealment of income and filing inaccurate particulars of income.

Analysis:
1. The case involved an appeal by the Assessee against an order by the National Faceless Appeal Center regarding disallowance of alleged bogus purchases. The Assessing Officer made additions under section 69C of the Act, which were later modified by the Ld. CIT (A) and further enhanced by the Hon'ble Tribunal. The penalty proceedings under section 271(1)(c) were initiated based on the disallowance. The Assessee submitted various documents during the quantum proceedings to support the purchases made, but the penalty was still imposed by the AO. The Ld. Commissioner affirmed the penalty, leading to the appeal before the Tribunal.

2. The Tribunal considered the facts and circumstances of the case, noting that the addition of alleged bogus purchases was uncertain as it varied from 15% to 20% of the total amount. The Tribunal also observed that the Assessee had provided necessary details during the assessment proceedings, distinguishing the case from instances of deliberate concealment. The Tribunal referred to judicial pronouncements and highlighted that penalty cannot be sustained on ad hoc additions. Additionally, the Tribunal emphasized the difference between concealment of income and filing inaccurate particulars of income, citing relevant case laws to support the argument that mere incorrect claims do not constitute inaccurate particulars. Consequently, the Tribunal concluded that the penalty was unsustainable and ordered its deletion.

Overall, the Tribunal allowed the Assessee's appeal, ruling in favor of deleting the penalty imposed under section 271(1)(c) for concealment of income and filing inaccurate particulars of income.

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