Disallowance of 20% on account of bogus purchases

The Income Tax Appellate Tribunal (ITAT) in Mumbai has dismissed an appeal by the revenue concerning a penalty levied under Section 271(1)(c). The penalty was based on a 20% disallowance of purchases deemed 'bogus' by the Assessing Officer due to the non-production of suppliers. However, the ITAT found that purchase vouchers were provided and payments were made through banking channels, and therefore, the penalty was not justified.

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH MUMBAI
BEFORE: SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
&
SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER
ITA No.338/Mum/2020 (Assessment Year : 2010-11 )

ACIT-26(1) Room No.623, 6th Floor Kautilya Bhavan Bandra Kurla Complex, Bandra (E) Mumbai – 400 051

PAN/GIR No. AABPG6912E

(Appellant)

vs

Shri Ghanshyam T. Gursahani C-602, Sagar Swapna Nagar Mulund (W) Mumbai – 400 080

(Respondent)

Revenue by
Shri T.S. Khalsa
Assessee by
None
Date of Hearing
29/07/2021
Date of Pronouncement
02/08/2021

O R D E R

This appeal by the revenue is against order of learned CIT(A)-40, Mumbai dated 23/10/2019 wherein following penalty levied under 271(1)(c).

2.The brief facts of the case leading to the levy of penalty are that the Assessing Officer in this case made disallowance of 20% on account of bogus purchases. However, drawing adverse inference for the nonproduction of the suppliers, the Assessing Officer disallowed 20% of the bogus purchases. However, the Assessing Officer did not doubt the sales. Penalty under section 271(1)(c) was also levied.

3.We have heard Ld DR and perused the records. As clear from the facts recorded above, the disallowance has been made on an estimated basis on account of the nonproduction of suppliers before the Assessing Officer. 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 rigours of penalty under section 271(1)(c). As a matter of fact on many occasions on similar circumstances in quantum proceedings the disallowance itself has been deleted.

4. In the result Revenue's appeal is dismissed. Order pronounced on 02/08/2021 by way of proper mentioning in the notice board.

Please find attached the enclosed file for the full judgement.