Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (1) TMI 1423 - AT - Income TaxPenalty u/s 271(1)(c) - unverifiable purchases - Held that - The addition in quantum proceedings attained the finality it is not based on the finding that the assessee has inflated the purchases and suppressed the income or claim of the assessee was absolutely bogus. AO has only doubted the purchases from certain parties and made the addition only to the extent of 25% of purchases made from such parties instead of disallowing entire purchases from those parties. When the AO has not given any finding of bogus purchases then the disallowance made by the AO is only based on estimation which was restricted by this Tribunal as reasonable estimated. The issue of levy of penalty u/s 271(1)(c) of such addition is now covered by the decision of Hon ble Jurisdiction High Court in case of CIT vs. Mahendra Singh Khedla 2012 (3) TMI 568 - RAJASTHAN HIGH COURT - Decided in favour of assessee.
Issues Involved:
- Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961 by CIT (A) - Assessment of penalty based on estimation of unverifiable purchases - Challenge of penalty by the assessee before the Appellate Tribunal ITAT Jaipur - Legal arguments regarding the imposition of penalty on estimation basis - Application of the decision in CIT vs. Mahendra Singh Khedla (supra) by the Appellate Tribunal Analysis: The judgment involves the confirmation of a penalty under section 271(1)(c) of the Income Tax Act, 1961 by the CIT (A) against the assessee for Assessment Year 2007-08. The assessee, engaged in the business of manufacturing gold & silver jewellery and handicrafts, was subjected to a penalty based on an addition equivalent to 25% of unverifiable purchases made from certain parties during assessment. The Appellate Tribunal ITAT Jaipur, in its order, highlighted that the Assessing Officer's addition was based on estimation without a definitive finding that the assessee had inflated purchases. The Tribunal had previously restricted the addition to 15% of unverifiable purchases, indicating that the initial estimation by the AO was not conclusive. The Tribunal referred to the decision in CIT vs. Mahendra Singh Khedla (supra) to emphasize that penalties based solely on estimation are not valid if there is no concrete evidence of concealment or furnishing inaccurate particulars of income. The legal arguments presented by the assessee focused on the lack of a specific finding by the AO regarding inflated purchases and the reliance on estimation for the penalty imposition. The assessee contended that penalties cannot be levied when income is assessed on an estimate basis, citing the decision in CIT vs. Mahendra Singh Khedla (supra) from the Jurisdictional High Court. The Tribunal considered these arguments and the material on record, noting that the AO's addition was not based on proven inflation of purchases but on estimation. The Tribunal concurred with the decision in CIT vs. Mahendra Singh Khedla (supra) and concluded that penalties solely based on estimation, without concrete evidence of concealment, are not justified. In light of the above analysis and following the precedent set by the decision in CIT vs. Mahendra Singh Khedla (supra), the Appellate Tribunal ITAT Jaipur decided to delete the penalty levied under section 271(1)(c) against the assessee. The Tribunal found that the penalty imposition was solely based on estimation without conclusive evidence of concealment or furnishing inaccurate particulars of income. Therefore, the appeal of the assessee was allowed, and the penalty was removed in accordance with the legal principles established in the cited case law.
|