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2010 (5) TMI 678 - ITAT MUMBAILevy of Penalty u/s 271(1)(c) - bogus purchases - AO noticed that the assessee was making bogus purchases from various concerns belong to Mr. F.H. Rizvi and treated as bogus purchases for AY 1996-97 and levied penalty u/s 271(1)(c). CIT(A), confirmed the addition to the extent of 25 per cent of total purchases. HELD THAT:- We find that the assessee had tried to substantiate its claim by filing affidavit and other material in quantum matter. In quantum matter, the CIT(A) asked the assessee to produce Mr. Rizwi for examination but the assessee failed to do so. The AO has also mentioned in the remand report, which was reproduced by the CIT(A) in quantum order that summons u/s 131 issued to Mr. Rizwi but the same was not complied by Mr. Rizwi. It was submitted by the AO that the assessee has not availed opportunity as he did not impress upon Shri Rizwi to attend before the AO. In respect of quantum matter if the assessee failed to submit such material information to substantiate their claim addition could be sustained but this aspect of human probability tendency of non-co-operation by the parties after business transaction is over, is required to be considered while deciding bona fide aspect of the assessee in penalty matter u/s 271(1)(c). The case of the assessee falls under the essence of Part B of the Explanation. The assessee offered reasonable explanation. The AO has not given finding based on some contradictory evidence to disapprove that explanation offered by the assessee which the assessee is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him. Penalty u/s 271(1)(c) cannot be levied unless the case is strictly covered by the provisions of section 271(1)(c). There is no finding that that the assessee has concealed particulars of income or furnished inaccurate particulars of income, discussed above. Under the circumstances, it cannot be held that the AO has found that the assessee has concealed particulars of income or furnished inaccurate particulars of income. We find that this is not a fit case for levy of penalty u/s 271(1)(c). We hereby cancel the penalties made by the AO u/s 271(1)(c) in all the three years under consideration.
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