Penalty under Section 271(1)(c) cannot be sustained where additions rest on estimation and uncommunicated information.

Whether penalty under Section 271(1)(c) can be sustained where additions for alleged bogus purchases were based on estimation and information from a tax authority not furnished to the assessee: the Tribunal applied the principle that penalty requires subjective satisfaction of concealment or furnishing of inaccurate particulars, which cannot rest on ad hoc estimation or guesswork; reliance on uncommunicated information that was not proved in assessment defeats that satisfaction. Outcome: penalty deleted and appeals allowed in favour of the assessee.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained where additions for alleged bogus purchases are made on the basis of estimation/guesswork and the Assessing Officer relied on information from the Sales Tax Department not furnished to the assessee.

Analysis: The appeals concern imposition of penalty under Section 271(1)(c) following assessment additions for alleged bogus purchases that were computed by the Assessing Officer on an estimated profit percentage and later reduced by the first appellate authority. The Tribunal applied the principle that levy of penalty under Section 271(1)(c) requires a clear subjective satisfaction that the assessee concealed particulars of income or furnished inaccurate particulars of income. Where additions are founded on ad-hoc estimation or guesswork, and where the Assessing Officer's conclusion rests on information obtained from the Sales Tax Department which was not placed before the assessee or proved in the assessment, the threshold for invoking penal machinery is not satisfied. The Tribunal relied on the decision of the Jurisdictional High Court holding that estimation-based additions and reliance on uncommunicated information do not justify invoking Section 271(1)(c), and emphasised the distinct and stricter parameters applicable to penalty proceedings compared to assessment proceedings.

Conclusion: Penalty under Section 271(1)(c) of the Income-tax Act, 1961 deleted; appeals allowed in favour of the assessee.

Ratio Decidendi: Penalty under Section 271(1)(c) cannot be imposed where the impugned additions are the result of estimation or guesswork and the Assessing Officer's reliance on information not furnished to the assessee prevents the requisite subjective satisfaction of concealment or furnishing of inaccurate particulars of income.

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