2012 (8) TMI 60 - AT - Income Tax

Penalty - Suppression of profit of bogus purchases - held that - when the sales have been accepted, there is no question of disputing the purchases because no sales could be made without purchases. - Since the party has confirmed the purchases and the purchases have been supported by bills and vouchers, therefore, the explanation of the assessee has been rightly accepted by the ld. CIT(A) for the purpose of deleting the addition. Penalty u/s 271 on surrender of income to buy peace - retraction of statement - held that - Such a retraction is, therefore, not valid and the assessee cannot be permitted to deny the statement made in the course of survey. Further, the assessee has already made surrender of amount and paid taxes voluntarily and the assessee cannot be allowed to withdraw the amount, on which taxes have already been paid voluntarily. Considering the totality of the facts and circumstances, we do not find any justification to interfere with the order of the ld. CIT(A) in confirming the addition of Rs.28,20,240/-. Reassessment u/s 147 - non issurance of notice u/s 143(2) - held that - AO rightly computed the income of the assessee as per original return in which notice u/s. 143(2) has been validly issued and as such, there was no need to issue any further notice u/s. 143(2) on the invalid revised return filed on 29.12.2008 which was also not taken into consideration by the AO while framing the assessment in the matter. Considering the totality of facts and circumstances, we are of the view that the notice u/s. 143(2) has been correctly issued in this case on the original return of income, on the basis of which the assessment order has been framed by the AO. May be, the AO has wrongly mentioned section 147 in the body of order would not make the assessment order u/s. 143(3) as invalid. - Decided against the assessee.

Issues Involved:
1. Deletion of addition on account of suppression of profit from bogus purchases.
2. Upholding of addition of credits surrendered during the survey.
3. Validity of assessment proceedings without notice under section 143(2).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Suppression of Profit from Bogus Purchases:

The Revenue challenged the deletion of an addition of Rs. 36,39,710/- made by the Assessing Officer (AO) on account of suppression of profit from bogus purchases shown from M/s. Satnam Trading Co. The AO had treated the purchases as bogus based on the inability of the assessee to produce the supplier for examination and certain discrepancies in the transactions, including bearer cheques and the economic condition of the supplier.

The assessee contended that the transactions were genuine, supported by bills and vouchers, and that the supplier had confirmed the transactions in response to inquiries under section 133(6). The CIT(A) agreed with the assessee, noting that the sales were accepted by the AO, and thus the purchases should not be treated as bogus. The CIT(A) also found that the Inspector's report, which was not confronted to the assessee, could not be relied upon.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the initial burden of proof was discharged by the assessee through confirmation from the supplier and supporting documents. The Tribunal also noted that the sales were accepted, and there was no material evidence to prove that the cheque amounts were returned to the assessee. Therefore, the deletion of the addition was justified.

2. Upholding of Addition of Credits Surrendered During the Survey:

The assessee challenged the addition of Rs. 28,20,240/- (Rs. 1,98,600/- in the name of M/s. Ridhi Sidhi Containers and Rs. 26,21,640/- in the name of M/s. Satnam Trading Co.) surrendered during the survey. The AO had treated these amounts as fictitious liabilities created by the assessee.

The assessee argued that the surrender was made to buy mental peace and was conditional on no penalty being levied. However, the AO initiated penalty proceedings, leading the assessee to retract the surrender by filing an affidavit.

The Tribunal found that the surrender was voluntary and made during the survey when the assessee could not explain the transactions. The Tribunal noted that the revised return filed by the assessee did not mention any conditions regarding penalty. The affidavit retracting the surrender was filed belatedly and was not considered valid. The Tribunal upheld the addition, stating that the assessee could not withdraw the surrendered amount on which taxes were paid voluntarily.

3. Validity of Assessment Proceedings Without Notice Under Section 143(2):

The assessee contended that the assessment proceedings were invalid due to the non-issuance of notice under section 143(2) after filing the revised return. The original return was filed on 30.10.2006, and notice under section 143(2) was issued on 14.09.2007, within the prescribed period.

The Tribunal noted that the assessment proceedings were based on the original return, and the notice under section 143(2) was validly issued. The revised return filed on 29.12.2008 was considered invalid and was only regularized by issuing notice under section 148. The Tribunal clarified that the AO framed the assessment based on the original return and that the proceedings under section 148 were for the benefit of the Revenue. Therefore, there was no need for a further notice under section 143(2) for the revised return.

The Tribunal dismissed the assessee's contention, upholding the validity of the assessment proceedings.

Conclusion:

The Tribunal dismissed both the departmental appeal and the cross-objection of the assessee, upholding the deletion of the addition of Rs. 36,39,710/- and confirming the addition of Rs. 28,20,240/-. The assessment proceedings were also held to be valid.

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