Penalty u/s 271(1)(c) Cannot be Imposed when Income Determined on Estimate Basis: ITAT [Read Order]
![Penalty u/s 271(1)(c) Cannot be Imposed when Income Determined on Estimate Basis: ITAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2023/06/Penalty-Income-Determined-Income-Determined-on-Estimate-Basis-Estimate-Basis-ITAT-Income-Tax-taxscan.jpg "Penalty u/s 271(1)(c) Cannot be Imposed when Income Determined on Estimate Basis: ITAT [Read Order]")
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty under Section 271(1)(c) of the Income Tax Act could not be imposed when income has been determined on an estimated basis. The assessee Mohmd Umar was engaged in the dealer in timber and wooden items and entire purchase and sales had been recorded in the books of account. For the A.Y. 2009-10, Assessee had...
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the penalty under Section 271(1)(c) of the Income Tax Act could not be imposed when income has been determined on an estimated basis.
The assessee Mohmd Umar was engaged in the dealer in timber and wooden items and entire purchase and sales had been recorded in the books of account. For the A.Y. 2009-10, Assessee had filed the return of income on 18.09.2010, for the A.Y. 2010-11 the same was duly processed under Section 143(1) of the Income Tax Act.
Subsequently, based on certain information received from the sales tax department of certain dealers who were providing entries for bogus purchase bills, the assessee's case was reopened. The AO noted that Assessee had also obtained purchase bills in A.Y. 2009-10 and 2010-2011.
In both the years, the Assessing Officer held that GP rate of 12.5% should be estimated to factor the suppressed profit on bogus purchases made from such parties and penalty under Section 271(1)(c) of the Income Tax Act had been levied by the AO on such ad hoc estimate on GP rate of 12.5% on some alleged bogus purchases.
Mahita Nair appeared on behalf of the revenue.
The two-member Bench of Amit Shukla, (Judicial Member) and Padmavathy S, (Accountant Member) noted that the penalty under Section 271(1)(c) of the Income Tax Act had been levied on estimation of the gross profit on adhoc basis, at the rate of 12% on alleged bogus purchases and assessee’s explanation had not been rebutted by the AO either during the assessment proceedings or penalty proceedings.
The Bench dismissed the appeal filed by the revenue holding the explanation of the Assessee and all the evidence filed before the authorities had neither been rebutted nor been found to be incorrect or the assessee had failed to substantiate the explanation.
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