Penalty cannot be imposed when income was estimated by applying a percentage

Mr. Mohammed Sharif Vs ITO (ITAT Mumbai) We find that in this case the assessment was framed by the AO after making ex-parte addition of Rs.16,54,146/-towards 100% of the bogus purchases which the co-ordinate bench of the Tribunal in quantum proceedings reduced to 12.5% of such purchases. In our opinion, this is a clear cut case where the income has been estimated by applying a percentage of 12.5% and therefore the penalty under section 271(1)(c) can not be imposed. We are, therefore, setting aside the order of Ld.  CIT(A) and direct the AO to delete the penalty. FULL TEXT OF THE ITAT JUDGEME...