INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Bogus purchases - Estimation of income - AO estimated profit element from non-genuine purchases at 12.5%

AO considering the submissions of the assessee treated purchases made from various parties as mentioned in the Assessment Order as non-genuine on the basis of the information received from DGIT that assessee has received accommodation entries from various parties without making any purchases but made purchases only in gray market. AO treated such purchases as non-genuine as the assessee could not produce the parties and also could not establish the movement of goods. However, AO estimated the profit element from non-genuine purchases at 12.5%. Subsequently, AO initiated penalty proceedings and levied penalty under section 271(1)(c). Held: AO had 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. High Court in the case of CIT v. Aero Traders Pvt. Ltd., (2010) 322 ITR 316 (Del) : 2010 TaxPub(DT) 1381 (Del-HC) wherein the 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. Thus, no infirmity in the order passed by CIT(A) in deleting the penalty under section 271(1)(c) levied by AO.

Followed:Harigopal Singh v. CIT (2002) 258 ITR 85 (P&H) : 2002 TaxPub(DT) 1625 (P&H-HC), CIT v. Aero Traders Pvt. Ltd., (2010) 322 ITR 316 (Del) : 2010 TaxPub(DT) 1381 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

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