The appeal filed by the Revenue arose from the order passed by the National Faceless Appeal Centre under section 250 of the Income-tax Act, 1961, relating to Assessment Year 2007-08. The impugned appellate order had deleted the penalty levied by the Assessing Officer under section 271(1)(c) of the Act.

During the relevant assessment year, the Assessing Officer made an addition of ₹1,35,719, being 6% of alleged bogus purchases amounting to ₹22,61,986. Based on this estimated addition, the Assessing Officer levied a penalty of ₹41,940, representing 100% of the tax sought to be evaded, on the ground of furnishing inaccurate particulars of income.

Aggrieved by the penalty order, the assessee preferred an appeal before the Commissioner (Appeals). The Commissioner (Appeals), after considering the submissions, deleted the penalty by relying on the decision of the Coordinate Bench of the ITAT, Mumbai, in the case of Ajay Loknath Lohia vs ITO, wherein it was held that penalty under section 271(1)(c) is not sustainable when the underlying addition is made on an estimated basis.

The Revenue carried the matter in appeal before the Tribunal. At the time of hearing, none appeared on behalf of the assessee. After hearing the Departmental Representative and examining the record, the Tribunal observed that the penalty had been levied solely on the basis of an estimated addition.

The Tribunal noted that it is a settled legal position, consistently followed by the ITAT Mumbai Benches, that penalty under section 271(1)(c) cannot be sustained where the addition is based on estimation. The Tribunal further observed that the Revenue was unable to place any contrary judicial precedent to rebut the reliance placed by the Commissioner (Appeals) on the coordinate bench decision.

Finding no infirmity in the order of the Commissioner (Appeals), the Tribunal upheld the deletion of penalty and dismissed the appeal filed by the Revenue.

SOURCE:  https://itat.gov.in/public/files/upload/1767782037-5HdpPx-1-TO.pdf

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