Bhupesh Sevantilal Shah Vs ITO (ITAT Mumbai)
No Penalty on Estimated Additions – ITAT Mumbai Rules in Bogus Purchase Case- Estimated Profit Element Cannot Lead to Penalty – Revenue’s Case Fails- No Cogent Evidence, Only Estimates – Tribunal Protects Assessee from Penalty
Assessee had filed return declaring income of Rs. 75.04 lakh which was assessed at Rs. 81.62 lakh after making addition of Rs. 5.29 lakh, being 12.5% of purchases treated as bogus from Shree Ram Steel. In appeal, CIT(A) reduced the disallowance to 7.5%, thereby sustaining addition of Rs. 3.17 lakh. AO thereafter levied penalty of Rs. 98,200 u/s 271(1)(c) for furnishing inaccurate particulars.
CIT(A) deleted the penalty by relying on coordinate bench decisions in V.K. Ispat & Alloys v. ITO & Fancy Diamonds India Pvt. Ltd., holding that when income is determined on estimated basis, penalty u/s 271(1)(c) is not leviable.
On Revenue’s appeal, Tribunal observed that neither AO nor CIT(A) had brought any cogent evidence to justify estimation of 12.5% or 7.5%. Additions were purely on estimate without comparable cases or concrete material. Tribunal held that when addition is made only on estimated profit element, it does not amount to concealment of income or furnishing of inaccurate particulars. Accordingly, CIT(A)’s order deleting penalty was affirmed & Revenue’s appeal was dismissed.
