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2016 (5) TMI 1401 - AT - Income TaxPenalty levied u/s. 271(1)(c) - addition on account of certain bogus purchases - Held that:- The materials brought on record are sufficient to establish that the purchases reportedly made by the assessee from the parties recorded in the books, were not purchased from them. It is equally true that the assessee would not have been above to sell the goods without making purchases. It is quite possible that the assessee might have purchased the goods from gray market without proper receipts and in that process saved about 25% or so as the price of the goods in the gray market is lower than the price of the goods charged by the reputed dealers. In this view of the matter, it would be proper to restrict the disallowance to the extent of 25% of the bogus purchases reportedly made by the assessee. The Assessing Officer is directed to restrict the addition to 25% of the bogus purchases in all the three years. Thus it shows that the restriction of the disallowance is made purely on estimation. Thus, it can be safely concluded that the additions were made on mere presumption and not on the basis of any material fact not disclosed by the assessee. A perusal of the orders of the authorities below in the assessment proceedings show that the purchases were well supported by bills/invoices though the parties from whom the purchases were made were found to be either name lenders or issuing accommodation bills.Thus levy of penalty u/s. 271(1)(c) of the Act not to be levied - Decided in favour of assessee.
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