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Facts
The assessee filed an appeal against a penalty levied under Section 271(1)(c) for AY 2010-11, related to an addition of Rs. 22,70,666/- made on account of alleged bogus purchases. The original return was accepted, but the case was reopened due to information about bogus accommodation entries. The addition was based on an estimated GP rate of 12.5% on purchases.
Held
The Tribunal held that the source of purchases was from the books and sales were not doubted. Merely because an addition was made by applying an ad-hoc GP rate for alleged suppressed profit, it does not automatically imply concealment of income to justify a penalty. Therefore, the penalty levied was deleted.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when addition is made based on an estimated GP rate on alleged bogus purchases, without doubting the sales and genuineness of purchases from books?
Sections Cited
271(1)(c), 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 30/09/2024 passed by NFAC, Delhi in relation to penalty proceedings u/s. 271(1)(c) for the A.Y.2010-11. 2. The assessee is aggrieved by levy of penalty u/s.271(1)(c) on account of addition of Rs.22,70,666/- which was made by M/s. Ronak Metal Industries applying the estimated GP rate of 12.5% on alleged bogus purchases.
At the outset, assessee’s appeal is time barred by 40 days. In the petition for condonation of delay assessee has stated that the assessee company was dissolved w.e.f. 31/03/2018 and at the time of filing of appeal in Form No.35 e-mail ID was provided as skmi137139@gmail.com, however, the order was served through e-mail on 30/09/2024 on personal e-mail ID of partner Mr.Pankaj Shivlal Shah: pankaj61169@gmail.com instead of skmi137139@gmail.com. Since it was sent on personal e-mail ID of partner therefore, it skipped the attention of the assessee and it is only when authorised representative opened the portal to find out the possibility of filing benefit under DTSVS revised scheme 2024, it came to his knowledge that ld. CIT(A) has already passed the order on 30/09/2024. It was on receiving of this order, appeal has been filed immediately. Under these circumstances, delay of 40 days is condoned.
The brief facts are that assessee has filed its revised return of income at Rs.4,75,660/- within the prescribed time limit whch was accepted. However, subsequently, the case was reopened by issuance of notice u/s.148 on 14/10/2014 on the ground that information has been received from DG (Investigation) for bogus accommodation entries in respect of purchase parties. It was noted that assessee has made purchases from six parties for amounts aggregating to Rs. 1,81,65,330/-. The ld. AO estimated GP rate of 12.5% while making the addition and such an M/s. Ronak Metal Industries addition was confirmed from the stage of appellate authority wherein GP rate of 12.5% was confirmed. Now on such estimated GP rate, penalty u/s 271(1)(c) of Rs.7,01,635/- has been levied.
From the perusal of the facts brought on record and the finding given in the impugned orders, it is seen that the source of purchases have been shown from the books and the only allegation was that assessee might have suppressed the profit by inflating the purchases on alleged bogus parties. Once source of purchases are from the books and corresponding sales have not been doubted and merely because addition has been made by applying the same adhoc GP rate to factor any suppression of alleged bogus profit, no penalty can be levied for concealment of income and accordingly, the penalty levied by the ld. AO is deleted.
In the result, appeal of the assessee is allowed.
Order pronounced on 25th February, 2025.