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2020 (10) TMI 1146 - AT - Income TaxPenalty u/s 271(1)(c) - bogus purchases - HELD THAT - As the revenue has failed to disprove to the hilt on the basis of clinching evidence the authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases no penalty u/s 271(1)(c) could have been validly imposed on the assessee. Restriction of the disallowance of entire purchases made by the A.O to 96% of the aggregate value of such purchases by the CIT(A), speaks for itself that the disallowance sustained in the hands of the assessee is merely backed by a process of estimation and not based on any concrete evidence. No clinching material has been brought on record by the revenue which could disprove the authenticity of the purchases claimed by the assessee to have been made from the aforementioned parties, no penalty u/s 271(1)(c) thus could have been validly imposed upon it. We thus not being able to find any infirmity in the view taken by the CIT(A), uphold the deletion of the penalty u/s 271(1)(c) by him. - Decided against revenue.
Issues:
- Appeal against orders passed by CIT(A) under Sec. 271(1)(c) for A.Ys. 2009-10 & 2010-11. - Justification for deleting penalty u/s 271(1)(c) by CIT(A). - Compliance with CBDT's Instruction No. 3/2018. - Validity of penalty imposition by A.O under Sec. 271(1)(c). Analysis: 1. The appeals were filed against orders passed by CIT(A) under Sec. 271(1)(c) for A.Ys. 2009-10 & 2010-11. The A.O disallowed purchases claimed by the assessee based on information received from the Sales Tax Department. The CIT(A) reduced the disallowance, leading to a penalty imposition by the A.O under Sec. 271(1)(c). The CIT(A) later vacated the penalty, leading to the current appeal by the revenue. 2. The main issue was the justification for deleting the penalty u/s 271(1)(c) by the CIT(A). The A.O imposed the penalty due to unproved purchases, but the CIT(A) found that disallowance of purchases did not automatically warrant a penalty. The Tribunal upheld the CIT(A)'s decision based on the principle that no penalty can be imposed if the facts are consistent with the possibility that the amount does not represent concealed income. 3. The appellant raised the issue of compliance with CBDT's Instruction No. 3/2018. However, the Tribunal did not find this argument sufficient to uphold the penalty imposition under Sec. 271(1)(c). The Tribunal focused on the lack of concrete evidence disproving the authenticity of the purchases claimed by the assessee, leading to the deletion of the penalty. 4. The Tribunal analyzed the validity of penalty imposition by the A.O under Sec. 271(1)(c). It was observed that the disallowance was based on estimation rather than concrete evidence. As the revenue failed to disprove the authenticity of the purchases, the Tribunal upheld the deletion of the penalty. The decision was supported by legal precedents emphasizing the need for concrete evidence to justify penalty imposition. In conclusion, the Tribunal dismissed the appeals filed by the revenue, upholding the deletion of the penalty u/s 271(1)(c) by the CIT(A) for both A.Ys. 2009-10 and 2010-11. The decision was based on the lack of concrete evidence disproving the authenticity of the purchases claimed by the assessee, emphasizing the principle that unproved claims do not automatically warrant a penalty under Sec. 271(1)(c).
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