2017 (9) TMI 1463 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of alleged bogus purchases - non providing cross examination - Held that - We have observed that no cross examination was allowed of the said four parties to the assessee despite the assessee bringing on record his grievances before learned CIT(A) that the assessee was not allowed cross examination as is emanating from the appellate order of learned CIT(A) but at the same time the assessee has also not furnished addresses of these four parties nor proof of movement of goods from selling parties to the assessee is brought on record. At the same time the assessee has also admitted that in these cases supplies are obtained from one vendor and invoices are obtained from other vendor but the material was purchased which was utilized/consumed for business wherein additions have either been deleted or [email protected]% was brought to tax on these alleged bogus purchases by appellate authorities. Thus the assessee deserves one more opportunity and the matter/issue needs to be restored to the file of the AO for de-novo determination of the issue of leviability of penalty u/s 271(1)(c). The assessee be allowed to raise all contentions both on merits and on law before the AO which are kept open, which shall be adjudicated de-novo by the AO on merits in accordance with law.

Summary

Issues:
Penalty under section 271(1)(c) for alleged bogus purchases.

Analysis:
The appeal was filed against the penalty order passed under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2010-11. The assessee, a builder and developer, faced scrutiny regarding purchases from four parties listed as suspicious dealers by the Maharashtra Sales Tax Department. The Assessing Officer (AO) disallowed the purchases of ?27,72,702 as bogus, adding it to the total income. The penalty proceedings ensued, and the AO levied a penalty of ?8,56,765 under section 271(1)(c).

During the penalty proceedings, the assessee contended that the purchases were genuine and utilized for business purposes. However, the AO found discrepancies, noting the lack of evidence for actual delivery and utilization of the material. The AO emphasized the absence of supporting documents like delivery challans or lorry receipts, leading to the conclusion of inaccurate particulars of income and the subsequent penalty imposition.

The Commissioner of Income Tax (Appeals) upheld the penalty, citing precedents that established penalty as a civil liability not dependent on mens rea. The CIT(A) highlighted the failure to prove delivery of goods and the lack of essential details regarding the purchases. Despite the assessee's submissions and reliance on various cases, the penalty was confirmed.

Subsequently, the assessee filed a second appeal before the tribunal, where none appeared on behalf of the assessee during the hearing. The tribunal reviewed the case, considering the nature of the business, turnover, and the disputed purchases. It observed discrepancies in the assessee's evidence regarding the movement of goods and payment details, along with the parties' dubious reputation as hawala operators.

The tribunal, recognizing the need for further investigation and the assessee's right to present additional evidence, decided to remand the issue back to the AO for a fresh determination of the penalty under section 271(1)(c). The tribunal allowed the assessee to raise all contentions and provide necessary evidence, emphasizing the principles of natural justice. Consequently, the appeal was allowed for statistical purposes, granting the assessee another opportunity to address the penalty issue effectively.