MANAV GEMS,MUMBAI vs. ASSTT COMM OF INCOME TAX CIRCLE 19(2) , MUMBAI

These appeals in & 1882/Mum/2022 for A.Y.2008-09 & 2009-10 arise out of the order by the ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) in appeal No.CIT(A)-30, Mumbai/10077/2019-20 & CIT(A)-30, Mumbai/10080/2019-20 dated 31/05/2022 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(C) of the Income Tax Act, 1961 (hereinafter referred to as Act).

The only identical issue to be decided in these appeals is as to whether the ld. CIT(A) was justified in confirming the levy of penalty u/s.271(1)(c)of the Act made by the ld. AO in respect of addition made on account of bogus purchases on an estimated basis.

We have heard rival submissions and perused the materials available on record. It is not in dispute that the assessee had made certain purchases which remained unverifiable for both the years under consideration. The purchases made by the assessee were duly sold by the assessee and accordingly, the ld. AO in the quantum proceedings had resorted to bring to tax only the profit element embedded in the value of said purchases. The said profit element was estimated by the ld. AO at 5% which was reduced to 3% by the ld. CIT(A) on first appeal. Due to smallness of the amount, the assessee chose not to prefer further appeals to the Tribunal on the quantum proceedings. Penalty has been levied u/s.271(1)(c) of the Act by the ld. AO on this estimated addition of 3% profit on value of disputed purchases. The law is very well settled that no penalty would lie when an addition has been made on an estimated basis as there cannot be any concealment or furnishing of any inaccurate particulars of income that could be alleged on the part of the assessee with regard to the same. Hence, we have no hesitation in directing the ld. AO to delete the penalty levied u/s.271(1)(c) of the Act for both the years under consideration.

In the result, both the appeals of the assessee are allowed.