⚖️ Hon’ble Mumbai ITAT held that when evidence of inflated purchases have been found during the search at assessee’s premises which has been extrapolated and addition has been made in all preceding years and restricted to certain % by appellate authorities then penalty u/s 271(1)(c) or 270A of the Act is not leviable on such additions.
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📌 Headnotes
1. Penalty on extrapolated and estimated Additions:
Penalty under Section 271(1)(c) or Section 270A cannot be levied where additions has been made on the basis of extrapolation of material found in search and sustained purely on an estimated basis (2% disallowance of purchases).
2. Bogus Purchases – Presumption of Inflation:
Even though direct evidence of inflated purchases pertained to AY 2019–20, the Tribunal upheld the presumption that similar inflation continued in earlier years; however, only a small estimated disallowance was sustained.
3. Quantum vs. Penalty Proceedings:
Sustaining additions in quantum proceedings on estimation does not automatically justify concealment penalty. Penalty provisions require clear evidence of concealment or misreporting.
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