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of <h1>Penalty under section 271(1)(c) set aside where alleged hawala purchases matched by recorded sales and addition was merely estimate</h1> <h3>M/s. Om Sai Traders M-12 Versus The Income Tax Officer Ward 3 (1) Thane</h3> M/s. Om Sai Traders M-12 Versus The Income Tax Officer Ward 3 (1) Thane - TMI Appeals against penalty proceedings under section 271(1)(c) for A.Y.2010-11 and 2011-12 challenging levy of penalties arising from additions based on alleged bogus purchases. The Assessing Officer had treated purchases of Rs. 74,89,235 (2010-11) and Rs. 64,93,318 (2011-12) as bogus and, in quantum, a gross profit (GP) rate of 12.5% was applied to restrict the addition. Penalty was imposed on the ground that the assessee 'failed to establish that the material has been purchased from the parties and had actually been used for its business.' Tribunal notes the purchases are reflected in the trading account and corresponding sales were not disturbed; similar penalty proceedings in A.Y.2009-10 were dropped. Holding that once additions are made on an estimated GP basis, 'no penalty can be levied u/s.271(1)(c),' and it is not a case of 'furnishing of inaccurate particulars of income.' Penalties deleted and appeals allowed.
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