2016 (12) TMI 57 - AT - Income Tax

Levy of penalty under section 271(1)(c) - addition of unexplained sundry creditor - bogus purchases - Held that - The assessee has failed to substantiate the purchases made from M/s Unifoil Enterprises. Except the purchase bill, no other evidence could be produced by the assessee in support of such bill. The assessee did not even make the payment for such purchases for a period of twelve years and thereafter, wrote back the amount in its books of account. Thus, in effect, the assessee did not make the payment for purchase of such goods. The seller i.e., M/s Unifoil Enterprises has denied to have sold the goods to the assessee by writing a letter to the Assessing Officer and also in the statement recorded by the Revenue authorities. The ITAT in the quantum proceedings has clearly held that the nonpayment of purchase consideration is a strong circumstance regarding non-genuineness of transactions and stands on its own de hors any other evidence. Also it cannot be believed that anybody would sell the goods worth ₹ 66 lakhs and would not pursue for payment thereof. No satisfactory explanation is given by the assessee for not making the payment of goods claimed to have been purchased from M/s Unifoil Enterprises. The only explanation given is that the goods supplied were of inferior quality but no evidence in this regard is produced by the assessee. On the other hand, the assessee claimed that the goods supplied by the assessee were exported by it and, therefore, the genuineness of the purchases cannot be doubted. Once the assessee claimed that the goods supplied by M/s Unifoil Enterprises are exported by it, it itself disproves the assessee s contention that the goods were of inferior quality.On these facts, the only inference that can be drawn is that no goods were supplied by M/s Unifoil Enterprises because if the goods had actually been supplied, no creditor would forego his claim merely because the other party is disputing the quality of the goods supplied. Thus we uphold the levy of penalty under section 271(1)(c) of the Act. - Decided against assessee.

Issues Involved:
1. Confirmation of penalty amounting to ?30,43,900/- on account of addition of unexplained sundry creditor.
2. Lack of opportunity to cross-examine during remand and penalty proceedings.
3. Separate nature of penalty proceedings and automatic imposition of penalty.
4. Alleged filing of inaccurate particulars despite income being exempt under section 80HHC.
5. Treatment of written-off amount in subsequent years as income.
6. Non-provision of proper opportunity of being heard by CIT(A).

Detailed Analysis:

1. Confirmation of Penalty Amounting to ?30,43,900/-:
The primary issue revolves around the penalty of ?30,43,900/- levied under section 271(1)(c) of the Income Tax Act, 1961, due to the addition of unexplained sundry creditor amounting to ?66,15,000/-. The assessee claimed purchases from M/s Unifoil Enterprises, which were disputed by the seller, leading to the addition. The Tribunal noted that the seller denied any sales to the assessee, and the non-payment of the purchase consideration for over twelve years further supported the non-genuineness of the transaction. The Tribunal upheld the addition under section 69 for unexplained cash and denied the enhanced deduction under section 80HHC, concluding that no genuine purchase was made from M/s Unifoil Enterprises.

2. Lack of Opportunity to Cross-Examine:
The assessee contended that no opportunity was provided to cross-examine the seller, M/s Unifoil Enterprises. However, the Tribunal found that the non-payment of the purchase consideration and the absence of any dispute evidence regarding the quality of goods supplied were strong indicators of the non-genuineness of the transaction. The Tribunal concluded that the lack of cross-examination did not affect the outcome, as the facts on record were sufficient to uphold the addition.

3. Separate Nature of Penalty Proceedings and Automatic Imposition of Penalty:
The assessee argued that penalty proceedings are separate and not automatic. The Tribunal acknowledged this but emphasized that the particulars of purchases furnished by the assessee were found to be incorrect and false. The Tribunal cited the decision in CIT Vs. Reliance Petroproducts Pvt. Ltd., stating that mere making of a claim which is not sustainable does not amount to furnishing inaccurate particulars. However, in this case, the claim of purchases was proven to be false, justifying the penalty.

4. Alleged Filing of Inaccurate Particulars Despite Income Being Exempt Under Section 80HHC:
The assessee claimed that there was no motive to file inaccurate particulars as the income was exempt under section 80HHC. The Tribunal rejected this argument, noting that the assessee's claim for higher deduction under section 80HHC was already dismissed in the quantum appeal. The Tribunal highlighted that the assessee was found to be inflating the value of exported goods, further discrediting the genuineness of the purchases.

5. Treatment of Written-Off Amount in Subsequent Years as Income:
The assessee argued that the written-off amount was declared as income in the assessment year 2007-08, and thus, no penalty should be levied for the assessment year 1995-96. The Tribunal dismissed this argument, stating that writing back the amount in subsequent years does not affect the levy of penalty for the year in question. The Tribunal emphasized that the non-payment for over a decade and the lack of evidence for any dispute regarding the quality of goods supported the non-genuineness of the purchases.

6. Non-Provision of Proper Opportunity of Being Heard by CIT(A):
The assessee contended that proper opportunity of being heard was not provided by CIT(A). The Tribunal noted that this ground was not pressed during the hearing and thus, treated it as rejected. The Tribunal focused on the merits of the penalty levy and upheld the CIT(A)'s order sustaining the penalty.

Conclusion:
The Tribunal upheld the levy of penalty under section 271(1)(c) of the Act, concluding that the assessee furnished inaccurate particulars of income by claiming non-genuine purchases from M/s Unifoil Enterprises. The appeal of the assessee was dismissed.

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