Penalty under section 271(1)(c) deleted where income addition was estimate-based, relief granted to assessee following precedent.

ITAT reviewed penalty imposed under income-tax law for alleged bogus purchases and found the disputed income addition was made on an estimate basis; accordingly, following a relevant higher-court precedent, the tribunal set aside the appellate order and directed the assessing officer to delete the penalty since the foundational addition was estimate-based, resulting in relief to the assessee. The reasoning rests on the principle that penalties for concealment or misstatement are not sustainable where the underlying addition is itself founded on estimation.

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Issues: (i) Whether the penalty order dated 12.08.2024 passed u/s 271(1)(c) should be quashed as being in substance a repeat of an earlier penalty order; (ii) Whether the Assessing Officer was justified in passing a fresh assessment/re-computation and initiating fresh penalty proceedings after the Tribunal directed re-computation; (iii) Whether penalty under section 271(1)(c) is leviable where the addition was sustained on estimate basis.

Issue (i): Whether the later penalty order dated 12.08.2024 is liable to be quashed as a mechanical repeat of an earlier penalty.

Analysis: The facts regarding existence of an earlier penalty order and the worklist status of appeals were examined. The earlier penalty order arose from an assessment order later set aside by the Tribunal; however no live appeal against the earlier penalty was before the appellate authority at the relevant time. The Assessing Officer proceeded on the basis that the earlier penalty had become infructuous after the Tribunal's directions.

Conclusion: This issue is against the assessee.

Issue (ii): Whether the Assessing Officer was justified in passing a fresh assessment/re-computation and initiating fresh penalty proceedings after the Tribunal's direction to re-compute the disallowance.

Analysis: The Tribunal's order restored quantification of bogus purchases to the Assessing Officer for re-computation. The Assessing Officer gave effect to that direction by recomputing the addition and issuing penalty notices based on the recomputed figure. The re-computation and consequent penalty proceedings were therefore consequence of the Tribunal's direction rather than an independently unwarranted fresh assessment.

Conclusion: This issue is against the assessee.

Issue (iii): Whether penalty under section 271(1)(c) is leviable where the addition was made on estimate basis.

Analysis: Authorities considering levy of penalty where additions rest on estimates were applied. The addition which formed the basis for penalty was found to be computed on an estimate basis. Applying the principle that penalty under section 271(1)(c) is not leviable where additions are sustained purely on estimation/guesswork and there is no clear concealment of particulars, the penalty could not be sustained.

Conclusion: This issue is in favour of the assessee.

Final Conclusion: The penalty imposed under section 271(1)(c) is set aside because the impugned additions were made on estimate basis; other grounds challenging repetition of penalty and the Assessing Officer's action are dismissed. The appeals are therefore partly allowed.

Ratio Decidendi: Penalty under section 271(1)(c) is not leviable where the addition on which penalty is based is sustained purely on estimation or guesswork and there is no clear finding of concealment of particulars of income.

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