2023 (1) TMI 475 - AT - Income Tax

Addition u/s 68 - assessee booked bogus purchase and sales in the books of accounts in the garb of introducing its own money through sales channel - HELD THAT - It can be reasonably concluded that assessee entered into fictitious transactions of purchase and sales. We did not find any anomaly in the order of the AO he rightly neutralise the difference amount of profit arisen out of fictitious purchase and sales.We further confirm his action u/s 68 treating the sales receipt as cash credit as defined in sec 68. AO rightly observed that in the garb of sales it is assesses own money which he introduced as sales. In view of the above addition u/s 68 is rightly made and ground raised by assessee are dismissed. Penalty u/s 271(1)(c) - HELD THAT - In the instant case, in quantum proceedings which were taken up to the ITAT, the Tribunal had recorded a fact that assessee booked bogus purchase and sales in the books of accounts in the garb of introducing its own money through sales channel, which is chargeable to tax u/s. 68 of the I.T. Act, 1961. Further, in quantum proceedings authorities below and ITAT have concurrently arrived at a finding of fact that the claim made by the assessee with regard to its purchase and sales are fictitious for subject assessment year. These findings of fact are not shown to be perverse in any manner. The legal claim made that once a transaction is shown in the books of accounts, it must follow that it is bona fide, is not understood. The transactions shown in the books are found to be false. The assessee has to show the reason why he believed at the time he filed his books, it was true. No such attempt was even made. Facts relevant to confirm the order of penalty has already been discussed in detail vide our order (supra), hence, there is no need to elaborate the facts of the case (as discussed in quantum appeal) again. Relying on the outcome of quantum appeal as decided by us, we dismiss all the grounds raised by assessee in penalty appeal. The assessee has filed inaccurate particulars of income at the time of filing return in order to conceal its income. Thus the provisions of section 271(1)(c) is clearly attracted in the assessee's case While filing the return of income, the assessee failed to offer the said incomes for taxation with a dishonest intention to conceal its income and thus evaded tax. Also during the course of penalty proceedings the assessee has failed to offer any plausible explanation in this regard thus the assessee has failed to make full and true disclosure of the facts while computing its income and filed return of income with inaccurate particulars and thereby concealing its taxable income. - Decided against assessee.

Summary

Issues Involved:
1. Legality of the assessment order under section 147 of the IT Act, 1961.
2. Addition of Rs 2,40,75,750/- under section 68 as income from other sources.
3. Restriction of deduction under section 80HHC of the IT Act, 1961.
4. Imposition of penalty under section 271(1)(c) of the IT Act, 1961.

Detailed Analysis:

1. Legality of the Assessment Order under Section 147:
The assessee challenged the legality of the assessment order passed under section 147, arguing that the notice was not served in accordance with the law and no speaking order was passed on objections against the notice under section 148. The Tribunal observed that the Assessing Officer (AO) provided opportunities to the assessee to file objections and dealt with them through a speaking order. The AO followed the ITAT's directions by supplying the reasons for reopening and established valid grounds for reopening. Thus, grounds 1, 2, and 3 raised by the assessee were dismissed as baseless.

2. Addition of Rs 2,40,75,750/- under Section 68:
The AO made an addition of Rs 2,40,75,750/- by invoking section 68, treating it as income from other sources. The Tribunal noted that the assessee engaged in fictitious trading of pharmaceutical goods without actual delivery. Statements recorded from key individuals, including the directors, confirmed that the transactions were accommodation entries without genuine movement of goods. The assessee failed to substantiate the genuineness of the transactions, as there was no evidence of payment, movement of goods, or confirmation of credit balances. The Tribunal upheld the AO's action under section 68, treating the sales receipts as cash credits, and dismissed ground 4.

3. Restriction of Deduction under Section 80HHC:
The assessee contested the restriction of deduction under section 80HHC to Rs 33,41,195/- instead of the claimed Rs 1,06,98,507/-. The Tribunal found that the AO had dealt with this issue in detail in the original order and the CIT(A) had confirmed the AO's decision. No new material or evidence was presented by the assessee to warrant a change in the decision. Therefore, the Tribunal confirmed the order of the CIT(A) and dismissed ground 5.

4. Imposition of Penalty under Section 271(1)(c):
The assessee argued that the penalty under section 271(1)(c) was wrongly imposed, as there was no material evidence of concealment or furnishing inaccurate particulars of income. The Tribunal noted that the penalty proceedings are separate from assessment proceedings and mere addition in quantum proceedings does not automatically result in penalty. However, in this case, the Tribunal found that the assessee had booked bogus purchases and sales, introducing its own money through sales channels, which was chargeable to tax under section 68. The Tribunal observed that the assessee did not provide a bona fide explanation for the false transactions recorded in the books. The Tribunal upheld the penalty, noting that the assessee's actions amounted to furnishing inaccurate particulars and concealing income. The Tribunal dismissed all grounds raised by the assessee in the penalty appeal, confirming the imposition of penalty.

Conclusion:
The Tribunal dismissed both appeals filed by the assessee, confirming the legality of the assessment order under section 147, the addition under section 68, the restriction of deduction under section 80HHC, and the imposition of penalty under section 271(1)(c). The Tribunal found that the assessee failed to substantiate the genuineness of transactions and provided inaccurate particulars of income, justifying the actions taken by the lower authorities.