2019 (10) TMI 286 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of alleged bogus purchases - HELD THAT - The penalty has been levied by the AO on the reason that there was no actual delivery of goods from the purchasers and only bills were issued which is evident from the fact that no supporting documents relating to the delivery of goods such as delivery challan, place of delivery, lorry receipts were furnished. As recorded by the AO, even during the course of penalty proceedings, the assessee could not produce any documentary evidence to establish the genuineness of the transaction. In Union of India v. Dharmendra Textiles Processors 2007 (7) TMI 307 - SUPREME COURT has held that penalty u/s 271(1)(c) is a civil liability and the wilful concealment is not an essential ingredient for attracting civil liability, unlike the matter of prosecution u/s 276C. While considering an appeal against an order made u/s 271(1)(c), what is required to be examined is the record which the officer imposing penalty had before him and if that record can sustain the finding that there has been concealment, that would be sufficient to sustain penalty. - Decided against assessee.

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Disallowance of alleged bogus purchases.
3. Adequacy of notice under Section 274 read with Section 271(1)(c).
4. Onus of proof and explanation provided by the assessee.
5. Applicability of judicial precedents and principles of natural justice.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue in this appeal is the levy of penalty of ?8,56,765/- under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was levied concerning the disallowance of alleged bogus purchases amounting to ?27,72,702/-. The Assessing Officer (AO) initiated penalty proceedings on the grounds that the assessee failed to produce documentary evidence to prove the genuineness of the transactions during both the assessment and penalty proceedings.

2. Disallowance of Alleged Bogus Purchases:
The AO made an addition of ?27,72,702/- towards bogus purchases from four parties. Despite being given opportunities, the assessee could not provide any documentary evidence such as delivery challans, lorry receipts, or other proof of actual delivery and utilization of goods. Consequently, the AO concluded that the transactions were not genuine and levied the penalty.

3. Adequacy of Notice under Section 274 read with Section 271(1)(c):
The assessee contended that the AO did not specify the charge under which the penalty proceedings were initiated, i.e., whether for "furnishing inaccurate particulars of income" or for "concealing particulars of income." The assessee argued that the penalty proceedings should be quashed on this ground. However, the Tribunal, relying on the Supreme Court's decision in *Mak Data P. Ltd. vs. CIT*, held that the AO is not required to record his satisfaction in a particular manner and that the assessee was aware of the charges and given an opportunity to be heard. Therefore, the notice was deemed adequate.

4. Onus of Proof and Explanation Provided by the Assessee:
The Tribunal observed that the initial burden of proving the genuineness of the purchases was on the assessee. The assessee's explanation that the purchases were genuine and the materials were received and utilized was not supported by any documentary evidence. The Tribunal cited the Supreme Court's decision in *Mak Data Pvt Ltd.* to emphasize that the burden of proof shifts to the Revenue only after the assessee discharges the initial onus with cogent and reliable evidence. Since the assessee failed to provide such evidence, the penalty was upheld.

5. Applicability of Judicial Precedents and Principles of Natural Justice:
The Tribunal considered various judicial precedents cited by both parties. It distinguished the present case from those cited by the assessee, noting that the facts and circumstances were different. The Tribunal also referred to the Supreme Court's decision in *Union of India v. Dharmendra Textiles Processors*, which held that penalty under Section 271(1)(c) is a civil liability and does not require wilful concealment. The Tribunal concluded that the penalty was justified based on the record before the AO, which indicated concealment of income.

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal found that the assessee failed to discharge the initial burden of proving the genuineness of the purchases and that the AO had adequately initiated the penalty proceedings. The decision was pronounced in the open Court on 30/09/2019.

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