Penalty u/s 271(1)(c) deleted as addition was estimated and assesee’s conduct was not contumacious

Penalty u/s 271(1)(c) deleted as addition for bogus purchases was based on estimation and assesee’s conduct was not found contumacious

ABCAUS Case Law Citation:
ABCAUS 3011 (2019) (06) ITAT

Important Case Laws Cited/relied upon by the parties:
Hindustan Steel Vs. State of Orissa (83 ITR 26)

Penalty u/s 271(1)(c) deleted as addition for bogus purchases was estimation

The appellant assessee had filed appeals against the orders of CIT-A wherein penalty levied under 271(1)(c) of the Income Tax Act, 1961 (the Act) was confirmed.

The Assessing Officer (AO) made a disallowance of 25% on account of bogus purchases. The assessee had supplied the purchase vouchers and the payment where shown to have been made by banking channel.

However drawing adverse inference for the nonproduction of the suppliers the assessing officer disallowed 25% of the bogus purchases. Though the assessing officer did not doubt the sales and also noted that assessee had shown gross profit above 12.5%.

The CIT-A confirmed the addition. Subsequently, the AO initiated Penalty proceedings and levied penalty under section 271(1)(c) of the Act.

The Tribunal observed that the disallowance had been made on an estimated basis on account of the nonproduction of suppliers before the assessing officer. The purchase vouchers were duly produced and the payments were through banking channel. The sales are not doubted and the gross profit shown by the assessee was over 12.5%.

In these backgrounds the Tribunal opined that the assessee could not be visited with the rigours of penalty under section 271(1)(c). The Tribunal stated that on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted.

Therefore, the Tribunal held that the assessee could not be said to have been guilty of concealment or furnishing of inaccurate particulars of income particularly when the conduct of the assessee was not found to be contumacious.

Accordingly, the Tribunal set aside the order’s of authorities below and deleted the levy of penalty.

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