2018 (4) TMI 798 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessee firm had furnished inaccurate particulars of income in its original return filed by claiming admittedly bogus purchases - Held that - It is a settled law that when sales are not doubted hundred percent disallowance on the plank of bogus purchase cannot be done. This exposition comes from the in the case of Nikunj eximp enterprises (2013 (1) TMI 88 - BOMBAY HIGH COURT). Just because assessee has filed a revised return of income and added the purchases as income it can be presumed that there has been any concealment of income or furnishing of inaccurate particulars of income. This is more so when no enquiry whatsoever was made by the assessing officer himself in the assessment proceedings or in the penalty proceedings. We duly note that Hon ble high courts and ITAT in a catena of cases have disapproved hundred percent addition in similar situation. Hence in our considered opinion in these facts of the assessee cannot be visited with the rigours of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
- Whether penalty u/s. 271(1)(c) should be deleted for furnishing inaccurate particulars of income in the original return filed by claiming bogus purchases.
- Whether penalty u/s. 271(1)(c) should be deleted for filing a revised return after the department was already aware of the bogus purchases.

Analysis:
Issue 1:
The case involved the appeal by the revenue against the order of the CIT(A) pertaining to the assessment year 2009-10. The assessee, engaged in construction business, filed a return of income declaring an amount. The AO received information from Sales Tax Authorities regarding Hawala transactions involving the assessee. Subsequently, a notice u/s 148 was issued, and the assessee filed a revised return offering the amount of bogus purchases for taxation. The AO imposed a penalty u/s 271(1)(c) amounting to the tax sought to be evaded. The assessee explained that purchases were made through brokers, and bills were obtained from non-genuine parties without their knowledge. The CIT(A) deleted the penalty, noting that the revised return was not a voluntary act after concealment was detected, and no evidence was presented to show inaccurate particulars or concealment.

Issue 2:
The assessing officer did not conduct any independent inquiry into the nature of transactions but imposed the penalty based on the revised return filed after receiving the notice of reopening. The ITAT upheld the CIT(A)'s decision to delete the penalty, emphasizing that the sales were not doubted, and a hundred percent disallowance for bogus purchases was not justified. The absence of any inquiry by the assessing officer and the precedent of disapproving such additions in similar cases led the ITAT to conclude that the penalty under section 271(1)(c) was unwarranted in the absence of evidence of concealment or inaccurate particulars.

In conclusion, the ITAT dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the penalty under section 271(1)(c) in both issues based on the lack of evidence of concealment or inaccurate particulars and the absence of independent inquiry by the assessing officer.