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TMI Blog2020 (8) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... rom various dealers as mentioned in the Assessment Order as non-genuine for the A.Y. 2011-12 on the basis of the information received from Sales Tax Department, Mumbai that assessee has received accommodation entries from the various dealers without making any purchases but made purchases only in gray market. The Assessing Officer treated such purchases from the parties as non-genuine as the assessee could not produce the parties and also could not establish the movement of goods. However, the Assessing Officer estimated the profit element from non-genuine purchases at 12.5% and brought to tax an amount of Rs..7,40,779/- out of purchases of Rs..59,26,206/-. The assessee accepted the estimation of profit element from non-genuine purchases made by the Assessing Officer and no further appeal has been preferred. Subsequently, Assessing Officer initiated penalty proceedings and levied penalty of Rs..2,75,000/- u/s. 271(1)(c) of the Act stating that the assessee has furnished inaccurate particulars of its income and concealed its income within the meaning of section 271(1)(c) r.w. Explanation 1 of the Act. On appeal the Ld.CIT(A) deleted the penalty since the disallowance was made by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced before us including the order of the authorities below. We find from the assessment order that the AO has made an addition of Rs. 45,76,587/- being 5% on total purchases on estimated basis in order to bring the bogus purchases to tax on the basis of information received from the third party i.e. State Sales Tax Department and DDIT(Inv) V(I), Mumbai which was not challenged by the assessee before the FAA and attained finality. Thereafter the AO levied penalty u/s 271(1)(c) of the Act on the ground that the assessee did not challenge the assessment order and accepted additions so made thereby accepting the concealment of income. We find from the record that the additions as made by the AO was a pure estimate and nothing concrete as to bogus purchases were brought on records by the AO by making any further enquiries or investigation. In our view the penalty cannot be imposed where the additions are made on estimate basis. The Tribunal has considered an identical issue in the case of Deepak Popatlal Gala, in ITA No. 5920/M/13 and vide order dated 27.3.2015, it has held as under:- "10. The next issue relates to disallowance made out of purchases and assessed u/s 69C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the AO has made addition merely on the basis of observations made by the Sales tax dept and has not conducted any independent enquiries for making the addition especially in a case where the assessee has discharged its primary onus of showing books of account, payment by way of account payee cheque and producing vouchers for sale of goods, such an addition could not be sustained. The Ld CIT(A) has also appreciated the contentions of the assessee that he was not provided with an opportunity to cross examine the sellers, which is required to be given as per the decision of Hon'ble Kerala High Court in the case of Ponkunnam Traders (83 ITR 508 & 102 ITR 366). Accordingly, the Ld CIT(A) has deleted the impugned addition. On a careful perusal of the decision rendered by Ld CIT(A) would show that the first appellate authority has analysed the issue in all angles and applied the ratio laid down by the High Courts and Tribunals in deciding this issue. Hence, we do not find any reason to interfere with his order on this issue. " We also find that in the following cases the Tribunal has taken similar view in some of the case that on the basis of third party evidence, addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no attempt on his part to conceal his income, he, by his order dated March 10, 1992, imposed a penalty of Rs. 50,000. Feeling aggrieved by this order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals), Patiala, who allowed the same holding that there was indeed no positive evidence whatever to show that the appellant's income during the year in question was, in fact, more than the income returned by him and that estimated additions in the returned income do not attract penalty under Section 271(1)(c)of the Act. The Revenue went up in appeal before the Income-tax Appellate Tribunal which was allowed by order dated May 30, 2001. It is against this order that the present appeal has been filed which raises the aforesaid question of law. 4. In order to attract Clause (c) of Section 271(1) of the Act, it is necessary that there must be concealment by the assessee of the particulars of his income or if he furnishes inaccurate particulars of such income. What is to be seen is whether the assessee in the present case had concealed his income as held by the Assessing Officer and the Tribunal. He had not maintained any accounts and he filed his return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ro Traders Pvt. Ltd., [322 ITR 316] wherein the Hon'ble High Court affirmed the order of the Tribunal in holding that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars. 8. In the case on hand the Assessing Officer has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. Thus, we do not observe any infirmity in the order passed by the Ld.CIT(A) in deleting the penalty u/s. 271(1)(c) of the Act levied by the Assessing Officer for the Assessment Year. Grounds raised by the revenue are rejected. 9. In the result, appeal of the revenue is dismissed. 10. Before parting, we noticed that this appeal was heard on 06.02.2020 and the pronouncement is delayed due to lockdown in view of COVID-19 pandemic. The pronouncement is as per Rule 34(5) of Income Tax Appellate Tribunal Rules, 1963 and Hon'ble Bombay High Court decision vide orders dated 15.04.2020 and 15.06.2020 extending the time bound periods specified by Hon'ble High Court by removing the period under lock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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