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2023 (10) TMI 440 - AT - Income TaxPenalty u/s 271(1)(c) - estimation of income - bogus purchases - addition is made in assessee’s case as a percentage of bogus purchases i.e. by applying 12.50% towards gross profit on the bogus purchases - main contention of the ld AR is that when profit is arrived at on an estimate basis there cannot be any levy of penalty for concealment of income - HELD THAT:- We notice that the coordinate bench in the case of ACIT vs. M/s. Fancy Diamonds India Pvt. Ltd. [2022 (6) TMI 1359 - ITAT MUMBAI] which has held that in case where the addition is made on estimated basis, the penalty u/s. 271(1)(c) of the Act is not leviable. Tribunal has relied on the decision of Krishi Tyre Retreading and Rubber Industries [2014 (2) TMI 21 - RAJASTHAN HIGH COURT] the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Sangrur Vanaspati Mills Ltd. [2008 (2) TMI 285 - PUNJAB AND HARYANA HIGH COURT] and Subhash Trading Co. Ltd. [1995 (11) TMI 37 - GUJARAT HIGH COURT] on estimated basis, there cannot be any penalty levied. In assessee’s case the AO has made the addition by estimating the profit @ 12.50% on alleged bogus purchases for the reason that the assessee has spiked the purchase price in order reduce the profits and the said purchases made by the assessee from hawala parties. The penalty u/s. 271(1)(c) is levied by applying the minimum tax rate on the said estimated profits and therefore the ratio of the above decisions is clearly applicable in assessee’s case. We hold that penalty u/s 271(1)(c) of the Act cannot be levied where the addition is made on estimate basis and accordingly the penalty levied is hereby deleted. Appeal of assessee allowed.
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