Penalty for concealment sustained on bogus purchases where addition was limited to the embedded profit element.

Penalty under section 271(1)(c) may be sustained where additions arise from bogus purchases and the quantum is restricted to the profit element embedded in those purchases. On the stated facts, the restricted addition was treated as concealed income to the extent of the undisclosed profit generated through the bogus purchases, rather than a mere abstract estimate. The penalty was therefore upheld and the assessee's challenge failed.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the quantum addition was sustained only to the extent of the profit element embedded in bogus purchases.

Analysis: The additions arose from bogus purchases. The quantum addition was restricted to 12.5% of such purchases, representing the profit element. On those facts, the reduced addition was not a mere estimated profit addition in the abstract, but reflected concealed income to the extent of the bogus purchases accepted as having generated undisclosed profit.

Conclusion: The penalty under section 271(1)(c) was rightly sustained and the assessee's challenge failed.

Final Conclusion: The appeal was dismissed and the penalty order stood confirmed.

Ratio Decidendi: Where bogus purchases are found and the addition is restricted to the profit element embedded therein, penalty for concealment may still be sustained if the facts show concealment of income to that extent.

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