2012 (5) TMI 750 - AT - Income Tax

Summary

Issues Involved: Appeal against penalty u/s 271(1)(c) of the Income Tax Act for unaccounted job charges and bogus purchases.

Unaccounted Job Charges:
The assessee filed its return declaring a loss, but additions were made by the AO for unaccounted job charges and bogus purchases. The CIT (A) partially relieved the assessee, but ITAT sustained the additions. The AO then levied a penalty on the unaccounted job charges. CIT (A) partially upheld the penalty, citing findings from the assessment order and the case law of Somnath Oil Mills. The penalty was confirmed based on the failure to prove innocence and the presence of mens rea. The appellant's arguments were rejected, and the penalty was upheld based on established manipulation of accounts.

Bogus Purchases:
The ITAT found that three parties denied making sales to the assessee and admitted to providing bogus bills. The appellant failed to produce evidence of genuine purchases or good faith transactions. The penalty on bogus purchases was sustained by CIT (A) and based on the judgment in Dharmendra Textiles & Processors. The appellant appealed the penalty decision.

The appellant argued that the additions were based on estimations and assumptions, and penalty should not be imposed under sec 271(1)(c). The AR cited various decisions to support their case. The DR contended that the AO was justified in levying the penalty based on findings of manipulation in accounts and non-genuine purchases. The ITAT observations and statements of the parties involved were highlighted.

The Tribunal considered the arguments and evidence presented by both parties. It noted that the additions were made on estimates and not concrete evidence of concealment. Citing relevant case law, the Tribunal held that the mere sustenance of additions does not justify penalty imposition. The Tribunal found that the ingredients of sec 271(1)(c) were not satisfied and directed the deletion of the penalty.

In conclusion, the appeal of the Assessee against the penalty was allowed, and the penalty was deleted.