2021 (2) TMI 884 - ITAT MUMBAI - Income Tax

Head Note / Extract:
Penalty u/s 271(1)(c) - Bogus purchases - in assessment proceedings had failed to substantiate the genuineness and veracity of its claim of having made purchases - HELD THAT:- As assessee could not substantiate the genuineness of the purchases claimed to have been made from the aforementioned party to the satisfaction of the A.O, the same, for the said reason was disallowed by him - we cannot remain oblivious of the fact that the A.O had at no stage rejected the book results of the assessee and had in fact accepted its sales. We are of a strong conviction that though the failure on the part of the assessee to substantiate the authenticity of the aforesaid purchase transaction would justify an addition/disallowance to the said extent, however, the same by no means would on such standalone basis justify levy of penalty under Sec. 271(1)(c). If an assessee gives an explanation which is unproved but not disproved i.e though the same is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee‟s case is false, then, no penalty under Sec.271(1)(c) can justifiably be imposed. Our aforesaid view is supported by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Upendra Vs. Mithani [2009 (8) TMI 1159 - BOMBAY HIGH COURT]. Accordingly we are of a strong conviction that in the absence of documentary evidence supporting the genuineness of the purchases claimed by the assessee to have been made from the aforementioned party, the same, though could have been disallowed, however, on the said standalone basis penalty under Sec.271(1)(c) could not have been validly imposed. Not finding ourselves to be in agreement with the view taken by the lower authorities, we, thus vacate the penalty. - Decided in favour of assessee.