2017 (2) TMI 1184 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made on specific issue pertaining to bogus purchases made by the assessee - Held that - We find that the substantive addition made in this case was not on estimated basis but was made specifically on the indulgence of mal-practices and bogus purchases committed by the assessee. We do not inclined with the submission of the assessee that the penalty was levied on the estimated additions. The assessee failed to substantiate and justify its explanation as per the obligation cast upon it by the Explanation 1 of section 271(1)(c). Keeping in view the concrete findings as elaborated supra which elucidate that assessee was indeed indulged in bogus purchases and availed the CENVAT benefit fraudulently. This estimation was not made on the basis of unverifiable transactions but the estimation of income was based on specific transactions carried out fraudulently and proved as bogus with supporting material evidences found in the case of assessee. These facts clearly establish that the assessee has concealed particulars of in income, therefore, in view of the above mentioned facts and findings, we disincline to interfere in the findings of the Ld. CIT(A). - Decided against assessee

Summary

Issues Involved:
1. Whether the additions were confirmed by the CIT(A) on an estimated basis.
2. Whether the appellant company had concealed the particulars of income.
3. Whether the penalty under section 271(1)(c) of the Income Tax Act, 1961 was correctly imposed.

Detailed Analysis:

Issue 1: Additions on Estimated Basis
The assessee argued that the additions were confirmed by the CIT(A) on an estimated basis. The CIT(A) had confirmed the addition made by the assessing officer from ?1,84,36,443 to ?15,59,506. The assessee contended that the penalty u/s 271(1)(c) should not be levied as the additions were on an estimated basis. However, the tribunal found that the substantive addition was not on an estimated basis but was made specifically due to the assessee's indulgence in malpractices and bogus purchases.

Issue 2: Concealment of Income
The CIT(A) and the assessing officer found that the appellant company had concealed particulars of income. The investigation by the Preventive Section of the Central Excise and Customs, Baroda revealed that the assessee had availed CENVAT credit based on fabricated and bogus invoices. The assessing officer disallowed the claim of bogus purchases and added ?1,84,20,574 to the total income of the assessee. The tribunal upheld this finding, stating that the assessee failed to offer a satisfactory explanation or substantiate its claims, thus concealing particulars of income.

Issue 3: Imposition of Penalty under Section 271(1)(c)
The assessing officer imposed a penalty of ?3,65,590 under section 271(1)(c) for A.Y. 2000-01 and ?2,92,270 for A.Y. 2001-02, which was sustained by the CIT(A). The tribunal found that the penalty was rightly imposed as the assessee was involved in fraudulent activities and bogus purchases. The tribunal noted that the penalty was not based on estimated additions but on specific transactions that were proved to be fraudulent. The tribunal emphasized that the assessee's actions clearly established concealment of income, justifying the penalty under section 271(1)(c).

Conclusion:
The tribunal dismissed both appeals filed by the assessee, confirming the imposition of penalties for concealment of income and fraudulent claims of CENVAT credit. The judgment highlighted that the additions were not merely estimated but based on concrete findings of bogus transactions. The penalty under section 271(1)(c) was deemed appropriate given the assessee's failure to provide a bona fide explanation and the clear evidence of fraudulent activities.