Estimated gross profit on alleged bogus purchases did not justify penalty when books, sales, and quantity tally remained intact.

Penalty under section 271(1)(c) was held unsustainable where the addition rested on an estimated gross profit applied to alleged bogus purchases. The purchase entries were recorded in the books, the corresponding sales and quantity tally were not disturbed, and the assessment addition was based only on an ad hoc estimation. As the quantum addition had already been substantially reduced on appeal, the material did not establish concealment of income or furnishing of inaccurate particulars. The penalty was therefore deleted in favour of the assessee.

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Issues: Whether penalty under section 271(1)(c) of the Income-tax Act, 1961 was leviable where the addition arose from estimated gross profit on alleged bogus purchases and the quantum addition had been substantially reduced in appeal.

Analysis: The purchase transactions were reflected in the books, the corresponding sales and quantity tally were not disturbed, and the addition in assessment was made only by applying an ad hoc gross profit rate. The quantum addition had already been reduced by the Tribunal from the original estimation. On such estimated and non-specific addition, concealment or furnishing of inaccurate particulars was not established for penalty purposes.

Conclusion: Penalty under section 271(1)(c) was not sustainable and was deleted in favour of the assessee.

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