INCOME TAX OFFICER-25(1)(5), MUMBAI vs. M/S. TUSHAR ENGINEERING INDUSTRIES, MUMBAI

Brief facts of the case leading to the levy of penalty are that the assessing officer in this case made disallowance of 100% on account of bogus purchase of Rs.7,01,341/-. The assessee has supplied the purchase vouchers and the payment where shown to have been made by banking channel. However, drawing adverse inference for the non production of the suppliers, the assessing officer disallowed 100% of the bogus purchases. However, the assessing officer did not doubt the sales. The learned CIT-A confirmed the addition. However, ITAT restricted the same to 12.5%. Penalty under section 271(1)(c) was also levied for an amount of Rs.27,090/-.

Against this order, the Revenue is in appeal before us.

We have heard both the counsel and perused the records. As clear from the facts recorded above, the disallowance has been made on an estimated basis on account of the ITO vs. M/s. Tushar Engineering Industries non-production of suppliers before the assessing officer. The purchase vouchers were duly produced and the payments were through banking channel. The sales are not doubted. In these backgrounds, in our considered opinion, the assessee cannot be visited with the rigours of penalty u/s. 271(1)(c). 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 honourable Supreme Court in the case of the M/s Hindustan Steel Ltd. vs State of Orissa (1972) 83 ITR 26(SC), wherein it was held that the authority may not levy the penalty if the conduct of the assessee is not found to be contumacious.