2022 (3) TMI 421 - AT - Income Tax

Penalty u/s 271(1)(c) - Additions on estimated basis against the Bogus purchases - recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order - whether the AO has levied the penalty under the specific charge as contemplated under the provisions of section 271(1)(c)? - HELD THAT - We refer the penalty order and find that the penalty has been levied on account of furnishing the inaccurate particulars of income which is the specific charge as provided under the provisions of section 271(1)(c) of the Act. Accordingly, we are not convinced with the ground of appeal raised by the assessee. Time limit for passing the penalty order - We find that there was nothing submitted by the assessee to justify that the penalty order has been passed beyond the time prescribed under the law. CIT (A) confirmed the assessment order vide order dated 25 January 2016, thus the financial year end as on 31st March 2016. Hence time limit to frame penalty order expire as on 31st March 2017 whereas penalty order was passed as on 26th March 2017. Therefore the same is within time limit provided under the provision of law. The penalty under the provisions of section 271(1)(c) of the Act can be levied either on account of concealment of income or furnishing inaccurate particulars of income - In this case the assessee has shown purchases from certain parties but failed to support the same based on the documentary evidence. Indeed the primary onus lies upon the assessee to justify the genuineness of the purchases. The assessee has only filed the copy of the ledger of the purchases from one-party. But the assessee failed to file the copies of the bill/invoices for the freight charges, octroi details of the vehicles used in the transportation of the goods. Thus it is clear that the assessee failed to discharge the onus cast upon it under the provisions of law. Admittedly, the assessee against the purchases has shown sales which were not doubted by the authorities below. Indeed, the sales are not possible without the corresponding purchases. Thus, the entire amount of purchases cannot be treated as income despite the fact that the assessee failed to discharge onus with respect to such purchases. ITAT estimated the amount of profit embedded in such purchases. But the estimation of profit does not lead to draw that the assessee cannot be held under the charge of furnishing the inaccurate particular of income. The percentage of profit is one of the method of determining the income in respect of which the inaccurate particulars of income was furnished. Accordingly we hold that, the assessee cannot discharge/ escape from the penalty levied under section 271(1)(c) of the Act. Thus we hold that the assessee cannot be escaped from the penalty provisions in a situation where the income was determined on estimated basis - Decided in favour of revenue.

Summary

Issues Involved:
1. Confirmation of penalty order under section 271(1)(c) of the Income Tax Act, 1961 by the Appellate Tribunal.
2. Justification of penalty imposition on inaccurate particulars of income.
3. Assessment of penalty based on estimated basis.
4. Consideration of legal precedent in penalty imposition cases.
5. Challenge to the penalty order on grounds of specific charge, limitation, and document consideration.

Issue 1: Confirmation of Penalty Order:
The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeals) confirming the penalty under section 271(1)(c) of the Act for the Assessment Year 2011-12. Despite the Assessee's absence during the hearing, the Tribunal proceeded to adjudicate the appeal after hearing the Revenue's representative.

Issue 2: Imposition of Penalty on Inaccurate Particulars:
The Assessee, a private limited company engaged in manufacturing, faced penalty proceedings for inaccurate income particulars due to bogus purchases. The Assessing Officer (AO) levied a penalty of ?1,01,75,518/-, representing 100% of the tax sought to be evaded. The Assessee's contention that the penalty was unjustified was based on the reduction of the addition by the Tribunal to ?15,29,625/-, arguing against a penalty for the estimated amount.

Issue 3: Assessment Based on Estimated Basis:
The Tribunal confirmed the penalty on the estimated profit embedded in the bogus purchases, rejecting the Assessee's argument against penalty imposition based on estimates. Legal precedent, including the case of ACIT vs. Chandravilas Hotel, supported the penalty based on estimated additions.

Issue 4: Legal Precedent in Penalty Cases:
The Tribunal referred to the judgment in ACIT vs. Chandravilas Hotel, emphasizing the legal fiction under section 271(1)(c) where the Assessee is deemed to have concealed income or furnished inaccurate particulars. The burden to prove lack of fraud or neglect falls on the Assessee, even in cases of estimated income determination.

Issue 5: Challenge to Penalty Order:
The Assessee challenged the penalty order on grounds of a lack of specific charge, limitation, and failure to consider available documents. However, the Tribunal upheld the penalty under section 271(1)(c) for furnishing inaccurate particulars of income, dismissing the Assessee's grounds for appeal.

In conclusion, the Tribunal dismissed the appeal, upholding the penalty order against the Assessee for inaccurate income particulars related to bogus purchases, based on legal provisions and precedents. The decision was pronounced on 20/12/2021 at Ahmedabad.