2025 (8) TMI 523 - AT - Income Tax

Penalty under Section 271(1)(c) not justified when additions are based on estimated gross profit margin

The ITAT Mumbai held that penalty under section 271(1)(c) for bogus purchases was not justified where additions were made on an estimated basis by ... Levy of penalty u/s. 271(1)(c) - bogus purchases - addition by applying 8% gross profit - HELD THAT:- CIT(A) has directed the AO to re-compute the levy of penalty on the additions sustained by him but, in our considered opinion, once the addition has been made on estimate basis on alleged bogus purchase, we are of the considered view that the facts do not warrant for the levy of penalty u/s 271(1)(c) -Appeal of the assessee is allowed. The ITAT Mumbai, per Hon'ble Accountant Member Narendra Kumar Billaiya, allowed the assessee's appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act for AY 2013-14. The penalty arose from an addition of Rs. 9,38,412 on alleged bogus purchases of Rs. 1,87,68,240, which was reduced by the CIT(A) to Rs. 3,02,169 after applying an 8% gross profit rate. The Tribunal held that since the addition was made on an estimated basis regarding alleged bogus purchases, 'the facts do not warrant for the levy of penalty u/s 271(1)(c) of the Act.' Consequently, the AO was directed to delete the penalty, and the appeal was allowed.