P Cube Construction Private Limited Vs DCIT (ITAT Mumbai)
The ITAT Mumbai allowed the assessee’s appeal & deleted penalty levied u/s 271(1)(c) for AY 2011-12, holding that penalty cannot survive where addition is sustained purely on estimation basis.
In the quantum proceedings, the AO had treated purchases as bogus & made addition of ₹83.98 lakh. The CIT(A) restricted the addition to 12.5%, sustaining only ₹10.49 lakh as estimated profit element, which was later upheld by ITAT. Based on this sustained addition, the AO levied penalty at 300% of tax sought to be evaded.
The Tribunal held that the addition was not based on any concrete finding of concealment or furnishing of inaccurate particulars, but was merely an estimated profit element. Relying on consistent coordinate bench decisions & Supreme Court ruling in Reliance Petroproducts, it was reiterated that making an incorrect claim or sustaining an estimated addition does not ipso facto attract penalty.
It was further observed that where the genuineness of purchases as such is not fully rejected & only profit element is estimated, the case falls outside the scope of section 271(1)(c). Courts have consistently held that penalty is not leviable on estimated additions, particularly in bogus purchase cases where addition is restricted to a percentage.
Accordingly, holding that the assessee had neither concealed income nor furnished inaccurate particulars, the ITAT directed deletion of the penalty & allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
