2019 (6) TMI 394 - AT - Income Tax

Addition of bogus purchases - Survey action u/s133A - CIT-A restricted addition to 10% - HELD THAT - Undoubtedly, the primary onus to prove genuineness of purchase transactions is on the assessee and he should have in first place furnished cogent evidences to prove the genuineness of the purchases and suppliers. No confirmations were filed by the assessee from suppliers. We also observe that at the time of assessment proceedings, the AO has also not exercised his power to summon the Vendors u/s. 133(6). If the assessee had failed to produce Vendors, the AO could have summoned them. There was lack of effort from both the sides to bring the true colour of purchase transaction to fore. The CIT (A) after considering entire facts came to the conclusion that it is a case of purchases from gray market and thereafter, bills have been procured from hawala operators. In the given facts, the entire purchases cannot be considered as bogus. At the same time, the assessee cannot be allowed to go scot free for not proving the genuineness of the purchases. The Co-ordinate Bench of the Tribunal in the case of M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT 2017 (6) TMI 514 - ITAT PUNE has held that in the cases of purchases from suspicious dealers, addition of 10% of the bogus purchases over and above the GP declared by the assessee for the year should be made. In the instant case, the CIT (A) has restricted the addition to 10% of the alleged bogus purchases. Hence, the impugned order is modified; the addition is restricted to 10% of alleged bogus purchases over and above the GP declared by the assessee. - Decided partly in favour of assessee. Penalty u/s 271(1)(c) - defective notice - furnishing inaccurate particulars of income - HELD THAT - A perusal of the order levying penalty dated 22.07.2015 reveals that though penalty was initiated for furnishing inaccurate particulars of income , the Assessing Officer invoked the other limb of section 271(1)(c) while levying penalty i.e. concealment of income . The manner in which penalty has been levied by the AO u/s.271(1)(c) clearly shows that there was ambiguity in the mind of Assessing Officer with regard to charge u/s.271(1)(c) that is to be invoked for levy of penalty. It is a well settle law that penalty cannot be levied on the charge other than the charge for which it was initiated. SHRI SAMSON PERINCHERY 2017 (1) TMI 1292 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Addition made in respect of bogus purchases
2. Deletion of penalty levied u/s.271(1)(c) of the Income Tax Act

Issue 1: Addition made in respect of bogus purchases

The case involved appeals by the Revenue against the Commissioner of Income Tax (Appeals) deleting an addition made for bogus purchases and penalty levied u/s.271(1)(c) of the Income Tax Act. The assessee, engaged in manufacturing electrical equipment, faced survey action revealing alleged bogus purchases. The Assessing Officer added the entire amount of bogus purchases due to lack of supporting documentation. The Commissioner of Income Tax (Appeals) upheld the purchases but limited the addition to 10% of the alleged bogus purchases. The Revenue challenged this decision, arguing that the purchases were not genuine and relied on a Tribunal decision for support.

The assessee contended that payments for the purchases were made through cheques and questioned the lack of efforts by the Assessing Officer to verify the transactions. The Tribunal observed that without purchases, there cannot be sales, and noted the lack of effort from both sides to establish the genuineness of the transactions. It was concluded that while not all purchases were bogus, the assessee failed to prove their genuineness. Referring to a previous Tribunal decision, the addition was restricted to 10% of the alleged bogus purchases over and above the declared GP.

Issue 2: Deletion of penalty levied u/s.271(1)(c) of the Income Tax Act

In the second appeal, the Revenue challenged the deletion of a penalty of a significant amount levied u/s.271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) had deleted the penalty citing ambiguity in the charge mentioned during penalty initiation and imposition. The Assessing Officer initiated the penalty for 'furnishing inaccurate particulars of income' but levied it for 'concealment of income.' The Tribunal highlighted that penalty cannot be imposed on a charge different from the one initiated. Citing a decision of the Hon'ble Bombay High Court, it upheld the deletion of the penalty, as the charge for which the penalty was levied differed from the one initiated.

Ultimately, the Tribunal dismissed the appeal of the Revenue, upholding the deletion of the penalty based on the ambiguity in the charge mentioned during penalty initiation and imposition.

In conclusion, the Tribunal partly allowed the appeal regarding the addition made for bogus purchases and dismissed the appeal concerning the deletion of the penalty levied u/s.271(1)(c) of the Income Tax Act. The judgments were delivered on June 3, 2019, by the Tribunal in Pune.