2017 (10) TMI 774 - AT - Income Tax

Penalty u/s.271(1)(c) - bogus purchase - Held that - In the instant case, the revenue has established beyond any reasonable doubt that the assessee was indulged in booking bogus bill of an unworthy supplier to inflate the expenses. The tell-tale evidence in the form of statement of the supplier and confirmation thereof in the cross-examination by assessee coupled with lack of proof towards delivery of purchase and clouded or suspicious banking transactions recorded to this effect leaves us in no manner of doubt that assessee had deliberately and willfully subverted the real source and character of the transactions. While doing so, the assessee also prevented the revenue from knowing the real source of supply and whereabouts of supplier of the alleged goods purchased, if any. In the circumstances, the appellate authorities were left with no option but to estimate the plausible overstatement of expenditure on purchases and thereby understatement of profits. The undeniable fact of bogus purchase entered in the books of accounts and thereby vitiating the taxable income by the assessee was found as a matter of fact after threadbare enquiry. In these circumstances, the ratio of the aforesaid decisions are not applicable at all. As a consequence, we find no merit whatsoever in the appeal of the assessee. Appeal of the Assessee is dismissed.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged bogus purchases in Assessment Year 2006-07.

Detailed Analysis:

1. Imposition of Penalty:
The appeal was against the penalty order under section 271(1)(c) of the Income Tax Act, 1961, imposed by the Assessing Officer and confirmed by the Commissioner of Income Tax(Appeals) for the Assessment Year 2006-07. The penalty was imposed on the assessee for allegedly furnishing inaccurate particulars of income or concealing particulars to evade taxes.

2. Background of the Case:
The assessee's return of income for the AY 2006-07 was reopened based on a reference from the Investigation Wing regarding bogus purchases from a specific supplier. The assessment revealed that the purchases from the supplier were found to be bogus, leading to an addition to the returned income.

3. AO's Findings and Penalty Imposition:
The AO found various irregularities, including the supplier's admission of issuing bogus bills, lack of establishment for the supplier's business, unestablished transportation, and control of the supplier's bank account by the assessee. The AO imposed a penalty under section 271(1)(c) based on the estimated amount of bogus purchases.

4. Confirmation of Penalty:
The Commissioner of Income Tax(Appeals) confirmed the penalty imposed by the AO, leading to the appeal before the Tribunal by the assessee.

5. Arguments by the Assessee:
The assessee contended that the penalty was erroneously imposed based on estimated additions towards alleged bogus purchases. The assessee argued that the purchases were eventually made, albeit from a different party, and the penalty on hypothetical escaped income was unwarranted. The assessee cited various case laws to support their argument against the penalty.

6. Revenue's Position:
The Department, on the other hand, supported the penalty, stating that the assessee had indeed recorded bogus purchases, which were confirmed in the appellate proceedings. The Department argued that the penalty was justified based on the deception and design of the assessee.

7. Tribunal's Decision:
The Tribunal carefully considered the submissions and evidence. It noted the peculiar facts of the case, where the assessee was found to have deliberately booked bogus bills to inflate expenses. The Tribunal concluded that the assessee willfully subverted the real source of transactions, leading to understatement of profits. It held that the imposition of penalty was justified, as the assessee's actions were clear and deliberate, leaving no room for leniency.

8. Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The decision was based on the deliberate actions of the assessee to misrepresent transactions and understate profits, leading to the imposition of the penalty.

This detailed analysis highlights the key aspects of the judgment, including the background of the case, findings of the authorities, arguments presented, and the Tribunal's final decision regarding the imposition of the penalty.