2022 (7) TMI 108 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus business loss - whether the assessee has furnished inaccurate particulars of income by adjusting the bogus business loss against the taxable short-term capital gain? - HELD THAT - As revenue authorities concurrently have reached the conclusion that there was no business activity carried out by the assessee in the year under consideration. The conclusion arrived by the authorities below wad based on the finding that the assessee in the income tax return has shown sales, purchases and other transaction in the income tax return whereas the assessee in the returns filed under VAT and excise has declared nil turnover. AR at the time of hearing has not controverted the finding of the authorities below. In such a situation there remains no ambiguity to the fact that the assessee has shown bogus transactions of the business by generating the loss therein in order to set offs such loss against the taxable income. Thus we hold that, the assessee has furnished inaccurate particulars of income by claiming bogus business loss. It is not the case that the profit under the head business and profession was estimated by the revenue authorities as contended by the learned AR for the assessee. In fact the entire business loss claimed by the assessee was treated as bogus in the absence of any documentary evidence. The primary onus lies upon the assessee to furnish the basic documentary evidence in support of the particulars shown by it in the income tax return. But we note that the assessee has failed to do so. Accordingly the provisions of section 145(3) of the Act was invoked after rejecting the loss shown by the assessee in entirety. As such, there was no element of estimating the income as contended by the learned AR for the assessee. Thus we disagree with the argument advanced by the learned AR for the assessee that profit from the business was estimated. The assessee cannot be absolved from the penalty merely on the reasoning that it has agreed for the addition/disallowance during the quantum proceedings. See MAK DATA P. LTD. 2013 (11) TMI 14 - SUPREME COURT In the case on hand, the ld. AR appearing on behalf of the assessee has not brought any material/reliable information suggesting that the assessee has made voluntary disclosure during the assessment proceedings before the detection of bogus loss shown by it by the income tax Department. Accordingly, we are of the view that the assessee cannot escape from the penalty in the given facts and circumstances. Accordingly, we do not find any infirmity in the order of the learned CIT-A and therefore we decline to interfere in his order. Hence, the ground of appeal of the assessee is hereby dismissed.

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for the Asst. Year 2014-15 based on rejection of books of accounts and disallowance of business loss.

Detailed Analysis:
1. The assessee, a limited company engaged in manufacturing aluminum alloys casting, declared total income of Rs. 5,12,968.00 but claimed a business loss of Rs. 72,63,457.00 in the Asst. Year 2014-15. The Assessing Officer (AO) rejected the business loss due to lack of supporting evidence under section 145(3) and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.

2. The assessee contended before the CIT-A that penalty should not be imposed when books are rejected and profit is estimated, and since the assessee voluntarily admitted the mistake, no penalty should be levied. However, the CIT-A upheld the penalty, stating that the assessee furnished inaccurate particulars to evade tax.

3. The Appellate Tribunal noted that the assessee set off the alleged bogus business loss against taxable short-term capital gain, resulting in higher taxable income. The Tribunal found that the assessee showed nil turnover in VAT and excise returns but declared turnover in income tax return, indicating bogus transactions to set off losses.

4. The Tribunal held that the assessee furnished inaccurate particulars of income by claiming bogus business loss without supporting evidence. The Tribunal rejected the argument that profit was estimated, emphasizing the assessee's failure to provide documentary proof.

5. Referring to the case law, the Tribunal emphasized that surrender of income is not voluntary if prompted by detection by tax authorities. Since the assessee did not demonstrate voluntary disclosure before detection of the bogus loss, the Tribunal upheld the penalty under section 271(1)(c).

6. Ultimately, the Tribunal dismissed the appeal, affirming the CIT-A's decision to uphold the penalty. The Tribunal found no grounds to interfere with the lower authorities' orders, concluding that the penalty was justified in the given circumstances.

In conclusion, the Appellate Tribunal upheld the penalty under section 271(1)(c) against the assessee for furnishing inaccurate particulars of income by claiming a bogus business loss without supporting evidence, despite the assessee's voluntary admission of the error during assessment proceedings.