2020 (3) TMI 1233 - AT - Income Tax

Penalty u/s 271(1)(c) - Bogus purchases - CIT-A deleted penalty - HELD THAT - No valid reason to disturb the findings of the Ld.CIT(A) in deleting the penalty levied u/s. 271(1)(c) of the Act on disallowance of purchases as mere disallowance will not attract penalty and when there is complete disclosure of expenses in the books by the assessee. Grounds raised by the revenue are rejected.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for alleged non-genuine purchases from Hawala parties.

Analysis:
1. Issue of Non-Genuine Purchases: The appeal was filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) regarding the deletion of penalty for alleged non-genuine purchases made by the assessee from certain parties. The Assessing Officer treated purchases from a specific party as non-genuine based on information from the Sales Tax Department, as the assessee failed to prove the genuineness of the purchases. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act, alleging inaccurate particulars and concealment of income. The Ld.CIT(A) deleted the penalty, emphasizing that mere disallowance of expenses does not automatically attract penalty.

2. Legal Precedents and Observations: The Ld.CIT(A) supported the deletion of penalty by citing various judicial pronouncements. It was highlighted that voluntary surrender of income does not necessarily imply concealment, as per precedents such as CIT vs Jayaraj Talkies and CIT v/s Surajbhan. The Supreme Court's decision in Dilip N. Shroff v. Jt. CIT emphasized that findings in assessment proceedings should not automatically lead to penalty imposition. Additionally, the case of CIT v. Reliance Petro Products clarified that disallowance of expenses does not inherently constitute concealment of income.

3. Decision and Rationale: Upon reviewing the Ld.CIT(A)'s findings, the Appellate Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Act. The Tribunal noted that a mere disallowance of purchases, without evidence of concealment or mala-fide intent to reduce taxable income, does not warrant penalty imposition. As there was full disclosure of expenses in the books by the assessee, the grounds raised by the revenue were rejected, and the appeal was dismissed.

In conclusion, the Appellate Tribunal upheld the decision to delete the penalty imposed on the assessee for alleged non-genuine purchases, emphasizing that a mere disallowance of expenses does not automatically attract penalty under section 271(1)(c) of the Income Tax Act. The decision was supported by legal precedents and a thorough analysis of the facts and circumstances of the case.