INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - Estimation of income on account of bogus purchases -

AO found that assessee obtained accommodation entries from Hawala operators, who were involved in providing bogus purchase bills without actual delivery of goods. Since the assessee could not substantiate the purchases with explanations, the AO made addition on account of bogus purchases. Subsequently, the AO levied penalty under section 271(1)(c). Aggrieved by the penalty order, the assessee filed an appeal before CIT (A). However, the CIT (A) confirmed the penalty and dismissed the appeal of the assessee. Held: It was found that in quantum appeal, the CIT (A) restricted the addition to the extent of 12.5% of the bogus purchases. AO made total disallowance of bogus purchases but accepted the sales in books of account and accordingly, the CIT (A) estimated the income of the assessee @12.5% of the bogus purchases. Therefore, as the addition was sustained on the estimated basis, no penalty under section 271(1)(c) could be levied on the estimated income. Hence, the penalty levied under section 271(1)(c) was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

SUBSCRIBE FOR FULL CONTENT