2022 (6) TMI 477 - AT - Income Tax

Penalty u/s 271(1)(c) - Bogus creditors u/s 68 - increase in amounts of certain creditors during the year under consideration compared to the rest of creditors required proof of their genuineness., accordingly the expenses booked appeared to be bogus in nature to ld. AO - scope of words inaccurate - HELD THAT - Mere disallowance of a claim, unless established by some positive evidence and not just presumption out of non submission of information by assessee, cannot be said to give rise to furnishing of inaccurate information. The Act does not incorporate any presumption of law of furnishing inaccurate information by virtue of failure of assessee to furnish the information to the satisfaction of Ld. Tax Authority. Therefore, in these circumstances levying of penalty and its sustenance in appeal deserve to be set aside - Decided in favour of assessee.

Summary

Issues:
Penalty imposition under section 271(1)(c) of the Income Tax Act, 1961 based on alleged concealment of income and furnishing inaccurate particulars of income.

Analysis:
1. The assessee appealed against the order dated 09.01.2019 for the assessment year 2012-13, challenging the additions made to the income, including Rs. 1,13,30,664 on account of bogus creditors under section 68 and Rs. 1,26,136 on account of short and excess debited to P&L. The appeal was dismissed due to the appellant's failure to appear, but later restored by ITAT. The penalty of Rs. 39,45,378 under section 271(1)(c) was imposed by the Assessing Officer.

2. The appellant raised multiple grounds of appeal before the Tribunal, arguing that there was no concealment or furnishing of inaccurate particulars of income. The appellant contended that disallowance of claims does not automatically lead to penalty imposition and that complete facts were disclosed in the return of income. The appellant also challenged the sufficiency of opportunities provided during penalty proceedings.

3. During the hearing, the Sr. DR highlighted the appellant's consistent failure to cooperate at any stage of assessment or appeals, justifying the penalty imposition. The Tribunal noted the history of the case, where the additions were made due to alleged bogus nature of creditors and expenses, but the AO did not establish the prima facie bogus nature through inquiry or evidence collection.

4. The Tribunal referred to the judgment in CIT vs. Reliance Petroproducts Pvt Ltd, emphasizing that penalty under section 271(1)(c) requires both concealment and furnishing inaccurate particulars of income. Mere disallowance of a claim, without concrete evidence of inaccurate particulars, does not warrant penalty imposition. The Tribunal concluded that the penalty and its confirmation by the CIT(A) lacked sufficient evidence and set aside the impugned order.

5. The Tribunal allowed the appeal, setting aside the penalty order pronounced on 8th June 2022.