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TMI Blog2018 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... us purchases either by concealing the income or furnishing inaccurate particulars of income. In view of above we reverse the order of the authorities below. The ground of appeal of the assessee is allowed. - I.T.A. No. 836/Ahd/2016 - - - Dated:- 28-6-2018 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI MAHAVIR PRASAD, JUDICIAL MEMBER For The Appellant : Shri M. K. Patel, A.R. For The Respondent : Shri Uma Shankar Prasad, Sr. D.R. ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-1, Vadodara [CIT(A) in short] vide appeal no.CAB- 1/258/2015-16 dated 12/01/2016 arising in the penalty order passed under s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 24/09/2014 relevant to Assessment Year (AY) 2011-12. 2. The assessee has raised the following grounds of appeal : 1. That on facts and in law the learned CIT(A) has grievously erred in confirming the levy of penalty u/s. 271(1)(c) of the Act of ₹ 2,73,567/-. 2. That on facts, in law, and on evidence on record, it ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent sale. There was no justification to make the payment after the sale of coal by the assessee to the suppliers. In view of above, the AO disallowed a sum of ₹ 820,652/- on account of sundry bogus creditors and added to the total income of the assessee. The AO during the assessment proceedings initiated the penalty proceedings under section 271(1)(c) of the Act for concealment of income. The AO during the assessment proceedings issued notice u/s 274 r.w.s. 271(1)(c) of the Act vide dated 18-3-2014 for levying the penalty. The assessee in compliance to it submitted that he agreed to the addition of sundry creditors for ₹ 820,542/- to avoid the litigation with the department and buy the peace of mind. As such, no allegation can be framed against the assessee either for concealment of the income or furnishing inaccurate particulars of income. However, the AO disregarded the contention of the assessee by observing that the assessee failed to prove the genuineness of the sundry creditors outstanding as on its balance sheet on 31st March 2011. Therefore, the same was offered to tax. As per explanation 1 to Section 271(c) of the Act, if there is a variation bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as evident from the order of AO. The relevant extract of the AO s order is reproduced below: 2. The assessee is engaged in the trading of coal and shown turnover of ₹ 158,40,775/- and gross profit of ₹ 13,82,545/- @8.72%. In immediately preceeding year, assessee has shown turnover of ₹ 212,76,812/- and Gross Profit of ₹ 16,10,240/- @ 7.56%. The learned AR before us further submitted that if the purchases are held as bogus, then the corresponding sales should also be treated as bogus and accordingly, no addition on account of bogus purchases can be called for. The case of the Revenue is not that assessee has suppressed the sales of coal. Thus the creditors arising out of the purchases cannot be treated as bogus merely on the basis that the assessee agreed to it. Moreover, the GP ratio during the year has also improved which strengthens the genuineness of purchases and so the creditors. The sundry creditors shown outstanding as on 31st March 2011 were paid in the subsequent year. The learned AR in support of assessee s claim drew our attention on the submission made before the AO that the outstanding creditors as on 31st March 2011 have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. Such contention could not be accepted as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c). That is clearly not the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars of income. The impugned sundry creditors are arising from the purchases which have not been disturbed by the lower authorities. It implies that the lower authorities have accepted the purchases but corresponding creditors have been added to the total income of the assessee for want of the address. In our considered view the addition on account of sundry creditors arising out of purchases cannot be added without disturbing the corresponding purchases. For example, the assessee has shown purchases from Shree Amaratbhai Mnabhai during the year under consideration for ₹ 90,865.00 and claimed to have made the payment for ₹ 30000.00 during the year leaving the outstanding balance of ₹ 60,865.00 as on 31.3.2011. However, the AO made the addition of an outstanding amount of ₹ 60,865.00, meaning thereby the purchases worth ₹ 30,000.00 from Shree Amaratbhai Mnabhai were accepted. It implies that the genuineness of the party namely Shree Amaratbhai Mnabhai for the purchases to the extent of ₹ 30,000.00 was accepted. Thus the addition has been made by the lower authorities on account of sundry outstanding creditors without questioning the correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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