2019 (5) TMI 1313 - AT - Income Tax

Penalty u/s. 271(1)(c) - bogus purchases from Hawala dealers - plausible explanation - HELD THAT - Upon perusal of assessee s submissions during appellate proceedings, we find that the assessee s plea revolve around the fact that the purchases were made under bona-fide belief and in good faith that the suppliers were genuine. The suppliers used to visit assessee s shop to supply the material as per routine practice. The TIN of the suppliers was found active at the time of purchase of goods. We find the explanation to be plausible one and the overall conduct of the assessee do not inspire us to confirm the penalty

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.
2. Justification of penalty imposition for alleged purchase.
3. Validity of the notice for levying penalty under section 271(1)(c) of the Act.

Issue 1: Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act:
The appeal contested the order of the Ld. Commissioner of Income-Tax (Appeals) confirming the penalty under section 271(1)(c) of the Act, amounting to ?5,74,340, in relation to an alleged addition of ?16,62,119. The appellant argued that there was no concealment of income or furnishing of inaccurate particulars. The assessing officer imposed the penalty despite the appellant submitting all details and evidence, and agreeing to offer the amount for taxation. The Tribunal had consistently upheld GP/estimated additions in cases of bogus purchases from Hawala dealers. The Ld. DR supported the penalty imposition, and the appeal was disposed of ex-parte as the AR sought withdrawal of Vakalatnama.

Issue 2: Justification of Penalty Imposition for Alleged Purchase:
The facts leading to the penalty imposition involved the appellant facing a quantum addition of ?16.62 lakhs due to alleged bogus purchases. The appellant claimed the purchases were made in good faith under the belief that the suppliers were genuine, as they regularly visited the appellant's shop to supply goods. However, the Ld. AO did not accept this explanation and initiated penalty proceedings under section 271(1)(c) for concealment of income. The appellant ultimately faced a penalty of ?5.74 lakhs, which was challenged before the Tribunal. The Tribunal found the appellant's explanation plausible, noting the active TIN of the suppliers at the time of purchase, and deleted the penalty, allowing ground nos. 1 & 2. The penalty imposition was not justified based on the conduct of the assessee.

Issue 3: Validity of the Notice for Levying Penalty under Section 271(1)(c) of the Act:
The appellant contended that the notice for levying penalty under section 271(1)(c) was bad in law and not sustainable. However, the Tribunal found no evidence to suggest any irregularity in the notice for levying the penalty. As a result, ground no. 3 was dismissed. The appeal was partly allowed by the Tribunal, with the penalty under section 271(1)(c) being deleted based on the appellant's plausible explanation and conduct.

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