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2021 (3) TMI 621 - AT - Income TaxBogus purchases - Addition is solely made upon sales tax department information - HELD THAT:- AO has not bothered to make any enquiry of his own. In this case the sales or any other aspect of the working have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from honourable jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT]. In this case the honourable High Court has upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. Facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation in our considered opinion on the facts and circumstances of the case the disallowance out of the bogus purchases done by the learned CIT(A) meets the end of justice. Accordingly we uphold the order of learned CIT(A). Penalty levied under 271(1)(c) - disallowance of 100% on account of bogus purchases solely on Sales Tax Department information - HELD THAT:- The purchase vouchers were duly produced and the payments were through banking channel. In these backgrounds in our considered opinion assessee cannot be visited with the regours of penalty under section 271(1)(c) of the Act. As a matter of fact on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted. Assessee cannot be said to have been guilty of concealment or furnishing of inaccurate particulars of income. In this regard we draw support from the decision of a larger bench of the honourable Supreme Court in the case of Hindustan Steels Ltd. state of Orissa [1969 (8) TMI 31 - SUPREME COURT] where in it was held that the authority may no t levy the penalty if the conduct of the assessee is not found to be contumacious. Tax effect in this case is below the limit fixed by CBDT for filing appeals before ITAT. The revenue has tried to make out a case that since the addition was made pursuant to information from sales tax department, this penalty appeal falls in the exception carved out in the CBDT circular regarding appeals arising out of additions made pursuant to information from outside agencies. We are of the opinion that this plea is not tenable inasmuch as once revenue accepts that penalty is levied on outside agency information the penalty levied will have no legs to stand. Revenue appeal dismissed.
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