2017 (5) TMI 474 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained expenditure - Held that - Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. - Decided in favour of assessee

Summary

Issues:
Appeal against confirmation of penalty u/s 271(1)(c) for Assessment Year 2010-11.

Analysis:
1. Legal Grounds for Penalty Initiation:
The appeal challenged the penalty imposed under section 271(1)(c) for inaccurate particulars of income. The assessee argued that the show cause notice was defective, lacking a specific charge, thus depriving the right to contest. Citing judicial precedents, the appellant contended that the penalty proceedings were vitiated. However, the tribunal found that the penalty was correctly initiated and upheld, as the relevant clause was implied in the notice and the grounds were clear. The tribunal relied on Section 292B to validate minor defects in notices, emphasizing the substantial compliance with the intent of the law.

2. Merits of Penalty Imposition:
Regarding the merits, the appellant disputed the application of Section 69C to alleged bogus purchases, emphasizing proper accounting and banking transactions. The appellant voluntarily accepted additions during quantum proceedings due to untraceable suppliers, aiming to avoid prolonged litigation. Despite possessing purchase documents and evidence, the appellant's claim was inconclusive without supplier confirmation. The tribunal found no concealment or inaccurate particulars, as the purchases were linked to business activities and supported by banking records. Relying on various case laws, the tribunal concluded that the penalty lacked justification and should be revoked. The tribunal allowed the appeal, partially overturning the penalty imposition.

In conclusion, the tribunal partially allowed the assessee's appeal, emphasizing the lack of justification for the penalty based on legal grounds and merits of the case.