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2015 (2) TMI 941 - ITAT MUMBAIPenalty 271(1)(c) - Held that:- The assessee's contention that the entire purchases as had been made had been recorded in the primary and final books, such as stock and ledger books have not been negated or controverted by the revenue authorities and even by the DR. The assessee had also shown the evidence of movement of goods in and out of the warehouse and goods transport receipts. These evidences bore the character of bonafide conduct of business by the assessee. The revenue authorities therefore, clearly erred in holding the issue against the assessee, even on an assumption. Whether or not a person has acted bona fide reflects the state of his mind in respect of his conduct, and, therefore, the assessee has his inherent limitations in establishing this aspect of the manner. It was in this regard that the higher judicial fora has tried to keep mens rea outside the perimeters for sustaining the penalty under normal business conduct or explanations of the assessee. All that the assessee can do, is to explain the circumstances in which he has acted in a particular manner and set out the related facts. This gets proved in favour of the assessee, when the AO writes in the assessment order, “on careful perusal of all submissions, it cannot be denied that purchases have not been made”. Hence The assessee’s explanation regarding bona fides of claim did not suffer from any apparent in consistencies or factual errors and it was quite in line with human probabilities and market trends, therefore, there was no good reason to reject the explanation and proceed to initiate and levy of penalty under section 271(1)(c). Thus explaining as to where the penalty is to be levied and to be deleted, we are of the view that the years under consideration, the revenue authorities erred in initiating penalty proceeding and levying of penalty. - Decided in favour of assessee.
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