2020 (10) TMI 1192 - AT - Income Tax

Penalty u/s 271(1)(c) - unproved claim of purchases - HELD THAT - Hon ble Supreme Court in CIT-2 Lucknow Vs. U.P State Bridge Corporation Ltd. 2018 (8) TMI 766 - SC ORDER observed, that where a claim of expenditure is neither found inaccurate nor could be viewed as concealment of income on the part of the assessee, then, merely because the said claim was not accepted or acceptable to the revenue, that by itself would not attract penalty under Sec. 271(1)(c). In the case before us, as the revenue had failed to disprove to the hilt on the basis of clinching documentary evidence the authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases no penalty under Sec. 271(1)(c) could have been validly imposed on it. - Decided against revenue.

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Consideration of non-genuine purchases and furnishing inaccurate particulars of income.
3. Admission of additional income during the survey under Section 133A.
4. Compliance with CBDT's Instruction No. 3/2018.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):
The revenue challenged the deletion of the penalty imposed under Section 271(1)(c) by the CIT(A). The penalty was originally levied due to the alleged concealment of income and furnishing of inaccurate particulars concerning non-genuine purchases. The CIT(A) observed that merely agreeing to an addition does not justify the penalty unless there is a clear finding of concealment. The Tribunal concurred with this view, emphasizing that a simple disallowance of a percentage of purchases without proof of concealment does not warrant a penalty under Section 271(1)(c).

2. Non-genuine Purchases and Inaccurate Particulars:
The assessee was found to have inflated its purchases by procuring accommodation bills. During a survey under Section 133A, it was revealed that the assessee had inflated its purchases by ?8,39,450. The assessee admitted to these non-genuine purchases during the survey. However, the CIT(A) noted that the disallowance of purchases was due to the suppliers' non-compliance with VAT provisions, leading to unverifiable transactions. The Tribunal supported this view, stating that the revenue failed to provide irrefutable evidence of concealment.

3. Admission of Additional Income:
The assessee had filed a revised computation of income, disallowing ?5,23,050 of the purchases before the notice under Section 148 was issued. The AO observed that the assessee did not disallow the full amount of ?8,39,450 as admitted during the survey. The AO restricted the addition to 20% of the purchases from M/s Manav Impex, resulting in an addition of ?63,280. The Tribunal noted that the assessee offered the additional income to avoid litigation and buy peace of mind, which does not automatically justify a penalty under Section 271(1)(c).

4. Compliance with CBDT's Instruction No. 3/2018:
The revenue filed the appeal in accordance with CBDT's Instruction No. 3/2018. However, the Tribunal found that the revenue failed to substantiate its claims with concrete evidence. The Tribunal highlighted that an unproved claim of purchases does not justify a penalty under Section 271(1)(c) unless there is clear evidence of concealment or furnishing inaccurate particulars.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty of ?1,99,294 imposed under Section 271(1)(c). The Tribunal emphasized that without concrete evidence of concealment or furnishing inaccurate particulars, mere disallowance of purchases does not justify a penalty. The appeal filed by the revenue was dismissed, and the order pronounced on 27.10.2020.

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