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Facts
The assessee filed appeals against penalty proceedings under Section 271(1)(c) for AY 2010-11 and 2011-12. The AO had treated entire purchases as bogus and added them to income. The penalty was levied on the addition made by applying a 12.5% GP rate on these alleged bogus purchases.
Held
The Tribunal held that since the purchases were reflected in the trading account and corresponding sales were not disturbed, and the addition was made on an estimated basis, penalty under Section 271(1)(c) cannot be levied. Furthermore, in a similar case for AY 2009-10, the penalty was dropped.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when purchases are accounted for and additions are made on an estimated basis without disturbing sales?
Sections Cited
271(1)(c)
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Income Tax Appellate Tribunal, ‘C’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeals have been filed by the assessee against separate impugned order of even date 24/09/2024 passed by NFAC, Delhi in relation to the penalty proceedings u/s. 271(1)(c) for the A.Y.2010-11 & 2011-12.
^ 6023/Mum/2024 Om Sai Traders 2. The assessee is aggrieved by levy of penalty of Rs.2,89,272/- for the A.Y.2010-11; and Rs.2,07,177/- for the A.Y.2011-12 levied on account of estimated GP rate on alleged bogus purchases. In the assessment order passed by the ld. AO, has treated the entire purchases of Rs.74,89,235/- as bogus and added to the income of the assessee for A.Y.2010-11; and Rs.64,93,318/- for A.Y.2011-12.
In the quantum proceedings from the stage of the Tribunal, the addition has been restricted to by applying the GP rate of 12.5% on the alleged bogus purchases as was applied by the ld. CIT (A). Now penalty has been levied on such application of GP rate of 12.5% by the ld. AO holding that assessee has failed to establish that the material has been purchased from the parties and had actually been used for its business.
After hearing both the parties and on perusal of the material placed on record, we find that the source of purchases made from the alleged hawala parties are from the books and corresponding sales from such purchases has not been disturbed. Once the purchases are reflected in the trading account and addition has been made by applying some higher GP rate of 12.5% on alleged bogus purchases and that to be on estimated basis, then no penalty can be levied u/s.271(1)(c). Further, in A.Y. 2009-10 it has been stated that on similar application of GP rate on bogus purchases, penalty initiated by the ld. AO was has dropped by him. In any case, it cannot be a case of furnishing of inaccurate particulars of income as held by ^ 6023/Mum/2024 Om Sai Traders the ld. AO, because all the particulars of purchases have been shown in the books alongwith corresponding sale. Accordingly, penalty levied by the ld. AO and sustained by the ld. CIT (A) is deleted in both the appeals.
In the result, both the appeals of the assessee are allowed. Order pronounced on 9th January,2025.