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2015 (10) TMI 1705 - AT - Income TaxPenalty u/s 271(1)(c) - assessee has furnished inaccurate particulars of its taxable income by treating the purchases from three parties as bogus - CIT(A) deleted the penalty - Held that:- The work performed as reflected in the trading Account has been accepted by the AO which implies that work could be completed only after having taken into account the ostensible bogus purchases. Thus without the purchases, the work executed as well as the closing stock which has been accepted by the AO could not have been possible. These purchases are building materials and the assessee is stated maintaining stock register which were also filed before the AO. No doubt the books of accounts were held not reflecting the correct state of affairs of the assessee's business but there has been no rejection of the same. Needless to say assessment proceedings are independent from penalty proceedings and imposition of the penalty depends on the facts and circumstances of each case. In this case at hand, the addition made by the AO was rightly deleted in appeal to be replaced by a trading addition by applying an estimation of the GP rate of 27% instead of 16% as shown by the assessee. This naturally becomes an addition sustained on estimate basis. A fact or allegation based on estimation cannot be said to be correct only; it can also be incorrect. Judgment of Punjab and Haryana High Court in the case of MM Rice Mills as reported in [2000 (10) TMI 4 - PUNJAB AND HARYANA High Court] is quite relevant in which it has been held that where the addition merely sustained on account of application of GP., the penalty would not be leviable. - Penalty deleted - Decided in favour of assessee.
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