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The levy of penalties is merely on disallowances of purchases and not finding of concealment of any particular or mala-fide intention to reduce taxable incomes. Additions made on account of disallowances of purchases as bogus automatically cannot justify the penalties levied u/s 271(1)(c) of the Act. Accordingly, the penalties of Rs. 50,040/- imposed u/s 271(1)(c) of the IT. Act, by the AO, are hereby deleted and the grounds of appeal, raised as above, for both these appeals, are allowed.” On a reading of the observations and findings of the Ld.CIT(A) we do not find any valid reason to disturb the findings of the Ld.CIT(A) in deleting the penalty levied u/s. 271(1)(c) of the Act on disallowance of purchases as mere disallowance will not attract penalty and when there is complete disclosure of expenses in the books by the assessee. Grounds raised by the revenue are rejected.

Shanti Prime Publication Pvt. Ltd.

Sec. 271(1)(c) of Income Tax Act, 1961— Penalty — Revenue filed appeal against the order of the CIT (Appeals) dated 03.12. 2018 for the Assessment year 2010-11. Assessee an individual engaged in the business of “Computer & Accessories Sales and Services” filed return of income on 29.09.2010 declaring income of Rs.19,00,960/-. Assessment was reopened u/s. 147 of the Act and reassessment was completed on 19.02.2015 u/s. 143(3) r.w.s 147 of the Act determining the income at Rs.20,62,898/-. While completing the reassessment the Assessing Officer treated purchases of Rs.1,61,938/- made from M/s. Blue Nile Enterprises as non-genuine on the basis of the information received from Sales Tax Department, Government of Maharashtra that assessee has received accommodation entries from the party without making any purchases but made purchases only in gray market. The Assessing Officer treated such purchases from the party as non-genuine as the assessee could not produce the parties and also could not establish the movement of goods. Thus, the Assessing Officer treated entire purchases as non-genuine and brought to tax. Assessing Officer initiated penalty proceedings and levied penalty u/s. 271(1)(c) of the Act stating that the assessee has furnished inaccurate particulars of its income and concealed its income within the meaning of section 271(1)(c) of the Act. On appeal the Ld.CIT(A) deleted the penalty. Against this order of the Ld.CIT(A), revenue filed appeal.
 On a reading of the observations and findings of the Ld.CIT(A) tribunal do not find any valid reason to disturb the findings of the Ld.CIT(A) in deleting the penalty levied u/s. 271(1)(c) of the Act on disallowance of purchases as mere disallowance will not attract penalty and when there is complete disclosure of expenses in the books by the assessee. Grounds raised by the revenue were rejected. And appeal of the revenue was dismissed. ---Deputy CIT vs. SMITA VILAS SIMPI.[2020] 23 ITCD Online 33 (MUM)

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