Tribunal overturns penalty under Income Tax Act, citing lack of evidence.

The tribunal allowed both appeals of the assessee, setting aside the CIT(A)'s order and deleting the penalty under section 271(1)(c) of the Income Tax Act. The tribunal found that the assessing officer's disallowance of purchases as bogus was based on estimates without proper verification, and the assessee had provided valid purchase vouchers. The tribunal emphasized that there was no evidence of concealment or furnishing inaccurate particulars of income, leading to the decision to overturn the penalty.

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Issues:
Penalty under section 271(1)(c) of the Income Tax Act - Disallowance of purchases as bogus - Non-production of suppliers - Levy of penalty by CIT(A) - Assessee's appeal against the penalty.

Analysis:
The case involved appeals by the assessee against a penalty levied under section 271(1)(c) of the Income Tax Act, sustaining disallowance of purchases as bogus by the assessing officer. The assessing officer made an ad hoc estimate of 20% purchases being bogus purchases, resulting in a gross profit ratio disallowance of 3.89%. The assessing officer raised concerns regarding frequent cash transactions and transfers to different accounts, leading to suspicion of the genuineness of purchases. Despite the assessee providing purchase vouchers and relevant details, the assessing officer treated 20% of the purchases as bogus due to non-production of suppliers. The CIT(A) confirmed the addition and levied the penalty under section 271(1)(c).

Upon careful consideration, the tribunal noted that the assessing officer had not issued notices to the alleged bogus suppliers and did not specify the deficiencies or the quantum of purchase vouchers involved. The tribunal observed that the disallowance was made on an estimated basis without doubting the sales and emphasized that the purchase vouchers were duly produced by the assessee. Citing the jurisdictional High Court decision and a larger bench decision of the Supreme Court, the tribunal concluded that the assessee could not be deemed guilty of concealment or furnishing inaccurate particulars of income. Relying on legal precedents, the tribunal set aside the CIT(A)'s order and deleted the levy of penalty.

In conclusion, the tribunal allowed both appeals of the assessee, emphasizing that the penalty under section 271(1)(c) was unwarranted in the given circumstances. The decision was pronounced in open court on 6th April 2021.

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