ITAT Dismisses Department’s Appeal, Upholds 5% Bogus Purchase Addition & Deletes Penalty

The Income Tax Appellate Tribunal (ITAT) dismissed the tax department's appeal and upheld the addition of 5% on account of bogus purchases while deleting the penalty imposed. The ITAT agreed with the lower authorities that there was evidence of unverifiable purchases. However, the tribunal held that while an addition to income was warranted, the imposition of a penalty was not justified as the assessee had not deliberately intended to evade tax. This decision reflects a balanced approach, acknowledging discrepancies in transactions while considering the intent behind them for penalty purposes.