TaxTMI 
TaxTMI 
2026 (1) TMI 912
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....dition made of 5% of total purchase value to the tune of Rs. 43,83,431/- from M/s. Euro Diam and Rs. 67,77,719/- from M/s. Little Diam as an accommodation entry for A.Y. 2012-13 for concealment of income without appreciating the facts and circumstances of the case in its right perspective for A.Y. 2012-13. 3. The learned Commissioner of Income Tax (Appeals) has wrongly levied penalty u/s. 271(1)(c) of the Income Tax Act, 1961 overlooking the facts and circumstances of the case by levying penalty at 5 percent on alleged bogus purchases on estimated basis. 4. The Appellant craves leave to add, amend, alter, modify substitute, delete, change or vary all or any of the ground or grounds of appeal." 3. The brief facts of the case are that the assessee is engaged in the business of manufacturing, importing, exporting and trading in diamonds. The assessee had filed his return of income declaring a total income of Rs. 3,12,660/-. During the course of assessment proceedings, the Assessing Officer noted that a search and seizure operation was carried out on 03.10.2013 in the case of the Bhanwarlal Jain Group, wherein it was found that the group was issuing accommodation e....
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....see had inflated purchase claims and shown inaccurate particulars of income, though the disallowance had been restricted by the Tribunal to 5%. The CIT(A) therefore held that the assessee was liable for penalty under section 271(1)(c) to the extent of tax on 5% of such purchases and directed the AO to restrict the penalty accordingly. The appeal was thus partly allowed. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the Counsel for the assessee placed reliance on judicial precedents which have held that when the additions made been on an ad-hoc basis, then no penalty is called for u/s 271(1)(c) of the Act. 6. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders. 7. We have heard the rival submissions and perused the record. The issue for consideration before us is whether penalty proceedings can be sustained for disallowances made on ad-hoc basis by ITAT with reference to a particular percentage of alleged bogus purchases. 8. It would be useful to refer to law laid down by various High Courts and Tribunal....
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....made disallowance u/s. 40(a)(ia). He further noticed that assessee has claimed various film production expenses and administrative expenses which were not open to full verification, and accordingly he made adhoc disallowance @ of 20%, aggregating to Rs. 9,83,145/-. In the first appeal, it appears that all these disallowances were not pressed before the Ld. CIT(A) by the assessee. The AO after invoking the provisions of Explanation 1 to section 271(1)(c), levied the penalty on these disallowances. Even the Ld. CIT(A) too has confirmed the levy of penalty on the aforesaid disallowance, firstly on the ground that assessee has failed to discharge its onus during the course of assessment proceedings as well as during the course of penalty proceedings; secondly the assessee has failed to comply with the statutory requirements of deducting TDS on the payments which has been claimed as expenses; and lastly the assessee's claim was not legally sustainable in law. 13. The Hon'ble ITAT while vacating the penalty proceedings observed as under: "We have heard the rival submissions of the parties and also carefully perused the materials placed on record. So far as levy of penalty....
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....g penalty proceedings on the basis of disallowances on estimate basis, observed as under: "As it transpires from the record available before us that the Assessing Officer levied penalty under section 271(1)(c) of the Act on estimate basis without any evidence on record with regard to concealment of income. Penalty under section 271(1)(c) of the Act is leviable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad-hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income....." 16. The Hon'ble Mumbai Tribunal in the case of Anita L. Ghadge v D.C.I.T. ITA NO.5959 & 5960/MUM/2014, while vacating penalty proceedings initiated on account of disallowance of 70% of commission and 30% of other expenses on an estimate basis for not maintaining proper accounts, observed as under: "We have heard the rival submissions, perused the orders of the Authorities below. On a perusal of the Assessment Order and the Ld.CIT(A) order, we find that the Assessing Officer disallo....