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2017 (9) TMI 574 - AT - Income TaxLevy of penalty u/s 271(1)(c) - trading additions applying G.P rate of 15% - proof of mensrea - Held that:- The Coordinate Bench in the quantum proceedings has upheld the rejection of books of accounts on account of certain discrepancies and the trading additions have been sustained by applying G.P rate of 15%, as against G.P rate of 30% applied by the AO and G.P rate of 11.60% offered by the assessee in its return of income, holding that the same will meet the ends of justice. It is a situation where one estimate is replaced by another estimate. The same can form the basis for addition in the quantum proceedings but the same cannot form the sole basis for levy of penalty. There is no positive act or finding recorded by the authorities which proves the act of concealment of income or furnishing inaccurate particulars of income on part of the assessee. Further, there is no finding that bogus purchases have been detected during the course of search operations and even the additions of ₹ 15,903/- made by the AO on this account has also been deleted by the Coordinate Bench in the quantum proceedings. Even looking at the quantum of bogus purchases of ₹ 15,703 vis-à-vis trading addition of ₹ 6,96,990 so sustained, there is a fundamental fallacy in the very basis for levy of penalty by the AO where he says that penalty has been levied on account of unverifiable purchases whereby the assessee has failed to prove the genuineness thereof. It is thus a case for levy of penalty purely on trading addition on an estimate basis which cannot be sustained. Appeal of the assessee is allowed.
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