The Income Tax Appellate Tribunal (ITAT), Mumbai bench in an appeal filed before it, held that once addition has been made on adhoc and estimate which has been reduced by the tribunal, then no penalty should be imposed on concealment of income under Section 27(a)(c) of Income Tax Act, 1961.
Dhaval Shah Counsel appeared for the assesee.Deepika Arora counsel appeared for the revenue.
Assessee Sawailal Bhatti filed the appeal against the order in relation to the penalty proceedings under Section 271 (1)(c of Income Tax Act, 1961 for the Assessment Year 2009-10, 2010-11 and 2011-12.
In all the years, the penalty has been levied on account of adhoc addition of Gross Profit rate on bogus purchases.
In the assessment order, the addition has been made by the AO on the basis of certain information received from Sales Tax authorities that assessee had made purchases from various suspicious parties.
The Assessing Officer accordingly applied Gross Profit rate on adhoc basis at the rate of 12.5% of the bogus purchases and the same was also confirmed by the CIT(A).
When the matter is filed before the tribunal it has reduced the addition by holding that GP rate of 5% should be estimated.
It was observed that assessee had filed all the details of purchases and corresponding sales had not been doubted. The sources of purchases are from the books and overall trading results have been accepted. Only allegation is that the assessee has taken accommodation bills for the purchase of items to suppress the profits.
Further, the bench of Amit Shukla, (Judicial Member) and Prashant Maharishi (Accountant Member) held that “Once, the addition has been made on adhoc and estimate which has been reduced by the Tribunal, then it cannot be held that there is any concealment of income so as to warrant any penalty u/s 271(1)(c) Income Tax Act, 1961″.
Therefore, the bench allowed the appeal filed by the assessee and deleted the penalty imposed by the assessing officer.
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