Penalty for inaccurate particulars cannot rest solely on an ad hoc gross-profit addition for alleged bogus purchases.

Penalty for concealment of income or furnishing inaccurate particulars cannot be sustained solely on an ad hoc estimated addition arising from alleged bogus purchases. Where the original disallowance is reduced and the final quantum addition is confined to an estimated gross-profit element, the estimate itself does not establish either concealment or inaccurate particulars. Accordingly, penalty under Section 271(1)(c) is not leviable on the ad hoc addition and is to be deleted in full.

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Issues: Whether penalty for concealment of income or furnishing inaccurate particulars could be sustained where the quantum addition on alleged bogus purchases was ultimately determined on an ad hoc estimate of gross profit.

Analysis: The original disallowance of the alleged bogus purchases was progressively reduced, and the ultimate quantum addition was confined to 5% of gross profit on an ad hoc basis. The settled position applied was that a penalty cannot be levied merely on an estimated or ad hoc addition, as such an addition does not by itself establish concealment of income or furnishing of inaccurate particulars.

Conclusion: Penalty under Section 271(1)(c) was not leviable on the ad hoc estimated addition and was liable to be deleted in full.

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