2017 (4) TMI 249 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus purchases - Held that - As far as addition with respect to suppressed profit is concerned, it is an estimated addition which was significantly reduced by the Tribunal. This issue is a debatable issue as the addition made by the AO was deleted by the ld.CIT(A), and when the Tribunal restored these additions partly, then appeal of the assessee has been admitted by the Hon ble High Court suggesting the question of law is involved. In such type of issue it cannot be said that the explanation submitted by the assessee in support of its addition as false, proving the fact that the assessee has concealed its income. Similarly, the assessee has given explanation with regard to the issue of bogus purchases. Its explanation was accepted by the ld.CIT(A) in the quantum appeal, but such conclusions of the ld.CIT(A) did not meet the approval of the Tribunal. But again, the Hon ble High Court has admitted question on this aspect also. Therefore, it is also debatable issue. The ld.CIT(A) has considered both these aspects in the impugned order and deleted the penalty. After going through the order of the ld.CIT(A), we do not see any reason to interfere in it. Accordingly, the appeal of the Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Addition on account of unrecorded production.
3. Addition on account of bogus purchases.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The Revenue's sole grievance was the deletion of a penalty of ?1,02,80,144/- imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961. The AO had imposed this penalty based on additions for suppressed profits and bogus purchases. The CIT(A) deleted the penalty, and the Tribunal upheld this deletion. The Tribunal noted that the additions were based on estimates and debatable issues, with the assessee's appeal admitted by the Hon'ble High Court, indicating that the questions of law were involved.

2. Addition on Account of Unrecorded Production:
The AO made additions for unrecorded production based on a chemical analysis report seized during a search. The report showed discrepancies between the actual production and the production recorded in the books. The CIT(A) deleted these additions, citing lack of evidence for sales outside the books, no unrecorded stock found during the search, and discrepancies in the average sale rate used by the AO. The Tribunal partly restored the additions but significantly reduced the amounts. The Tribunal upheld the CIT(A)'s view that the additions were based on estimates and debatable issues, and thus, no penalty for concealment was justified.

3. Addition on Account of Bogus Purchases:
The AO added ?51,08,219/- for bogus purchases based on a transporter's statement that no goods were transported as shown in the lorry receipts. The CIT(A) deleted this addition, noting that the purchases were confirmed by the supplier, endorsed by excise authorities, and paid through the bank. The Tribunal reversed the CIT(A)'s order, emphasizing the need for independent proof of the purchases' genuineness. However, the Tribunal agreed with the CIT(A) that the penalty was not justified, as the AO had not conclusively proven that the purchases were bogus, and the issue was debatable.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of the penalty. The Tribunal highlighted that the additions were based on estimates and debatable issues, with the assessee's appeal admitted by the Hon'ble High Court, indicating substantial questions of law. The Tribunal found no reason to interfere with the CIT(A)'s order, concluding that the penalty for concealment under section 271(1)(c) was not exigible on the assessee.