ITO, WARD 1(2),, THANE vs. SMT. MANIBEN MANSHI BAUVA, THANE

Brief facts of the case leading to levy of penalty are that the Assessing Officer in this case made disallowance of 12.5% on account of bogus purchases. The assessee has supplied the purchase vouchers and the payments were shown to have been made by banking channel. However, drawing adverse inference for the non-production of the suppliers the Assessing Officer disallowed 12.5% of the bogus purchases. However the Assessing Officer did not doubt the sales. Penalty under section 271(1)(c) of the Act was also levied. Learned CIT(A) deleted the penalty.

Against this order the Revenue is in appeal before us.

We have heard learned Departmental Representative and perused the records. As clear from the facts recorded above, the disallowance has been 2 Smt. Maniben Manshi Bauva made on account of the non-production of suppliers before the Assessing Officer. The purchase vouchers were duly produced and the payments were made through banking channel. The sales are not doubted. In these background in our considered opinion the assessee cannot be visited with the regours of penalty under section 271(1)(c) of the Act. As a matter of fact, on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted. In our considered opinion on the facts and circumstances of the case the assessee cannot be said to have been guilty of concealment or furnishing of inaccurate particulars of income. In this regard we draw support from the decision of a larger bench of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa (83 ITR 26), wherein it was held that the authority may not levy penalty if the conduct of the assessee is not found to be contumacious. Moreover, it is also noted that the tax effect in this case is below the limit fixed by CBDT for filing appeal before the Tribunal. The plea that addition was based on sales tax department has nothing to do with penalty under section 271(1)(c) of the Act in this case as the penalty is based upon Assessing Officer’s order.