KONEL CORPORATION PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER 12(3)(2), MUMBAI

Brief facts of the case leading to the levy of penalty are that the assessing officer in these cases made disallowance of 25% on account of bogus purchases. Assessee has 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. However the assessing officer did not doubt the sales. The assessing officer also noted that assessee has shown

Against this order assessee 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 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 in our considered opinion assessee cannot be visited with the rigours of penalty under section 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 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 Hindustan Steel Vs. State of Orissa (83 ITR 26) where in it was held that the authority may no t levy the penalty if the conduct of the assessee is not found to be contumacious.

In the background of aforesaid discussion and precedent we set aside the order’s of authorities below and delete the levy of penalty.

In the result assessee’s appeal is allowed.