Case Law Details
ITO Vs Mohd Umar Timber Mart (ITAT Mumbai)
ITAT Mumbai held that it is settled legal position that when income is estimated, then there can be no question of imposing penalty u/s 271(1)(c) of the Act.
Facts- The assessee in dealer in timber and wooden items. For the A.Y. 2009-10, Assessee has filed the return of income on 18.09.2010, for the A.Y. 2010-11 the same was duly processed u/s 143(1).
Subsequently, based on certain information received from sales tax department, Maharashtra, giving names and details of certain dealers, who were providing entries for bogus purchase bills, assessee’s case was reopened u/s 147. The AO in the assessment order noted that, Assessee has also obtained purchases bills from some of the parties for sums aggregating to Rs. 23,97,933/- in A.Y. 2009-10 and Rs. 18,65,671/- in A.Y. 2010-2011. In both the years, the Ld. Assessing Officer held that GP rate of 12.5% should be estimated to factor the suppressed profit on bogus purchases made from such parties. Now, penalty u/s 271(1)(c) has been levied by the AO on such adhoc estimate on GP rate of 12.5% on some alleged bogus purchases.
Conclusion- It is settled legal position that when income is estimated, then there can be no question of imposing penalty u/s 271(1)(c) of the Act. The Hon’ble Delhi High Court in CIT Vs. Aero Traders Pvt. Ltd. (2010) 322 ITR 316 (Del.) held that no penalty u/s 271(1)(c) can be imposed when income is determined on estimate basis.
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