2025 (2) TMI 1509 - AT - Income Tax

Condonation of Delay granted; penalty for concealment deleted where additions rested only on estimated gross profit, not disputed books.

Condonation of a 40-day delay was granted where procedural factors (company dissolution and misdirected email) prevented timely knowledge and the appeal ... Levy of penalty u/s. 271(1)(c) - addition made by applying the estimated GP rate of 12.5% on alleged bogus purchases - HELD THAT:- As seen that the source of purchases have been shown from the books and the only allegation was that assessee might have suppressed the profit by inflating the purchases on alleged bogus parties. Once source of purchases are from the books and corresponding sales have not been doubted and merely because addition has been made by applying the same adhoc GP rate to factor any suppression of alleged bogus profit, no penalty can be levied for concealment of income and accordingly, the penalty levied by the ld. AO is deleted. Appeal of the assessee is allowed. Issues: (i) Whether the delay in filing the appeal should be condoned. (ii) Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained where additions were made by applying an estimated gross profit rate though purchases shown in books were not doubted.Issue (i): Whether the delay in filing the appeal should be condoned.Analysis: The reasons for delay include dissolution of the assessee company, provision of one e-mail ID in the appeal form and service of the impugned order on a different personal e-mail ID which resulted in the order not coming to the attention of the assessee until a later date; the appeal was filed immediately upon knowledge of the order.Conclusion: Delay of 40 days in filing the appeal is condoned.Issue (ii): Whether penalty under Section 271(1)(c) can be levied where addition was made by applying an estimated gross profit rate while purchases shown in books and corresponding sales were not doubted.Analysis: The source of purchases was recorded in books of account and corresponding sales were not questioned. The addition resulted from application of an adhoc estimated gross profit rate to alleged bogus purchases. In the absence of any finding that income was concealed beyond the estimation exercise, imposition of penalty for concealment is not justified.Conclusion: Penalty levied under Section 271(1)(c) is deleted; the appeal is allowed on this ground in favour of the assessee.Final Conclusion: The appeal is allowed after condoning the delay and deleting the penalty, resulting in a decision favourable to the assessee.Ratio Decidendi: Where transactions are recorded in books of account and corresponding sales are not disputed, an addition made solely by applying an estimated gross profit rate to alleged bogus purchases does not sustain a penalty under Section 271(1)(c) for concealment of income.