2023 (11) TMI 1356 - AT - Income Tax

Penalty Under Section 271(1)(c) Deleted; Tribunal Rules Estimation-Based Penalty Unwarranted for 2009-10 Assessment Year

The Appellate Tribunal allowed the appeal, ruling in favor of the assessee by directing the deletion of the penalty imposed under Section 271(1)(c) of the ... Penalty u/s 271(1)(c) - estimation of income on bogus purchases - AO disallowed 50% of such purchases - CIT(A) restricted to 5% of gross turnover - HELD THAT:- Addition was certainly bases on estimation made by the AO and modified by the ld. CIT(A). As in the case of Bombaywala Readymade Stores [2014 (11) TMI 1099 - GUJARAT HIGH COURT] held that “whether since no income had been filed by assessee and income was assessed on estimate basis by revenue, no penalty u/s 271(1)(c) could be levied for concealment of income.” Thus, we find that no penalty is leviable on the assessee, when the addition on account of impugned purchases was estimated merely on the basis of estimation, therefore, direct to delete the penalty levied u/s 271(1)(c). In the result, ground of appeal raised by the assessee is allowed. The appeal in this case is against the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2009-10. The core issue revolves around whether the penalty was rightly imposed on the assessee for the disallowance of certain purchases made by the Assessing Officer.The key legal question considered in this case was whether a penalty under Section 271(1)(c) could be levied on the assessee for estimated additions made by the Assessing Officer. The Appellate Tribunal analyzed the competing arguments presented by the parties and examined relevant case laws to reach a decision.The assessee argued that no penalty should be levied on estimated additions, citing various case laws to support this position. On the other hand, the revenue contended that the disallowance was not based on estimation but on the profit element embedded in the purchases, justifying the penalty imposed by the Assessing Officer.After considering the submissions and reviewing the record, the Tribunal found that the addition on account of the disputed purchases was indeed based on estimation. The Tribunal referred to the decision in the case of ITO Vs Bombaywala Readymade Stores, where it was held that no penalty could be levied under Section 271(1)(c) when income was assessed on an estimated basis. Therefore, the Tribunal concluded that no penalty was warranted in this case and directed the deletion of the penalty levied under Section 271(1)(c) of the Act.In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of the assessee and ordering the deletion of the penalty. The judgment was announced in open court on 6th November 2023.