2016 (9) TMI 1376 - AT - Income Tax

Penalty U/s 271(1)(c) - bogus purchases - defective notice - assessee has concealed its income and has filed inaccurate particulars of income - assessee submitted that the notice issued for penalty was vague and the necessary particulars have not been provided in the notice - separate enquiries/proceedings claim - Held that - Sec 274 of the Act provides the procedure for imposing the penalty. A bare reading of the provision postulates that the penalty under the chapter shall not be made unless the assessee has been earned or has been given a reasonable opportunity of being heard. As noticed hereinabove in the penalty order the assessee was called upon to file the reply thereafter the assessee was also called upon in the personal hearing. The assessee was given opportunity to represent his case before the ld Assessing Officer at the time of finalization of penalty and after giving the reasonable opportunity to the assessee the penalty order was passed by the ld Assessing Officer. Therefore also in our view there was no violation of the procedure as laid down U/s 274 of the Act. On merit we find that the assessee was deriving income from trading of precious and semi precious stones and in the quantum proceedings the Assessing Officer enquired about the correctness of the purchases made by the applicant and after following a due process the Assessing Officer enquired from the assessee about the purchases made from three parties discussed in detail in paragraph No. 1 of the assessment order but the assessee failed to produce the parties. The Assessing Officer thereafter tried to examine the said parties after issuing the summons but the summons returned unserved as the concerned parties were non-existent. Thereafter the Assessing Officer made enquiries by sending the Inspector but the addresses give by the assessee was not found. Therefore the Assessing Officer had treated the purchases as bogus and disallowed 25% of such purchases by invoking the provisions of Section 145(3) of the Act. The same was confirmed in the appeal by the ld. CIT(A). No appeal was filed before the Tribunal. Thus the separate enquiries/proceedings were not required to be conducted by the Assessing Officer at the stage of penalty as the assessee has failed to discharge the initial onus of proving the genuineness of the parties from whom the said three bills were issued at the assessment stage or before the appellate stage. In our view no separate proceedings were required at the stage of determining the penalty against the assessee in the penalty proceedings - Decided against assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legitimacy of penalty under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars of income.
3. Adequacy of notice issued under Section 274 read with Section 271 of the Income Tax Act, 1961.
4. Merits of the penalty based on the findings of bogus purchases.

Detailed Analysis:

Condonation of Delay:
The assessee filed an appeal with a one-day delay due to a miscalculation of the appeal period by the Chartered Accountant and the assessee's unavailability due to a business trip to Japan. The Tribunal condoned the delay, finding no laches on the part of the assessee, thus allowing the appeal to be heard.

Legitimacy of Penalty under Section 271(1)(c):
The assessee was penalized for furnishing inaccurate particulars and concealing income based on bogus purchases. The Tribunal examined the penalty's legitimacy, noting that the assessee had declared purchases from parties providing only bills without actual goods. The Tribunal upheld the penalty, agreeing with the lower authorities that the assessee's conduct was contumacious and the purchases were indeed bogus.

Adequacy of Notice Issued:
The assessee argued that the penalty notice was vague as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal referenced the Karnataka High Court's ruling in the Manjunatha Cotton case, emphasizing that the notice must be clear about the charge. However, the Tribunal found that the notice and penalty proceedings were appropriately conducted for both offenses, and the final penalty was imposed for furnishing inaccurate particulars, thus rejecting the assessee's argument.

Merits of the Penalty Based on Findings of Bogus Purchases:
The Tribunal noted that the assessee failed to substantiate the genuineness of purchases from three parties, which were found to be non-existent upon investigation. The Tribunal held that the penalty proceedings did not require separate evidence beyond the assessment findings, as the assessee did not discharge the initial onus of proving the genuineness of the purchases. The Tribunal cited the Delhi High Court's decision in Roger Enterprises, affirming that the findings in assessment proceedings are relevant and admissible in penalty proceedings. Consequently, the Tribunal dismissed the assessee's appeal, upholding the penalty for furnishing inaccurate particulars of income.

Conclusion:
The Tribunal's judgment comprehensively addressed the issues of delay condonation, the legitimacy of the penalty under Section 271(1)(c), the adequacy of the penalty notice, and the merits of the penalty based on bogus purchases. The appeal was dismissed, and the penalty was upheld, emphasizing the importance of accurate and genuine financial disclosures in tax filings.