Penalty 271(1)(c) Merely if suppliers not traced at given address not indicative of concealment of income or furnishing of inaccurate particulars-ITAT
ABCAUS Case Law Citation:
ABCAUS 1231 (2017) (05) ITAT
The appellant assessee was aggrieved by the order passed by the CIT(A) qua confirmation of penalty u/s 271(1)(c) of Income Tax Act, 1961 (‘the Act’).
Assessment Year : 2010-11
Date/Month of Pronouncement: May, 2017
Important Case Laws Cited relied upon:
CIT Vs. SSA’S Emerald Meadows (SC)
CIT Vs. Samson Perinchery (Bombay High Court)
CIT Vs. Manjunatha Cotton & Ginning Factory (Karnataka High Court)
Wadhwa Estate & Developers Vs. ACIT (Mumbai ITAT)
CIT Vs. Reliance Petro products [2010 322 ITR 158 Supreme Court]
CIT Vs. Larsen & Toubro Ltd. [2014 366 ITR 502 Bombay High Court]
CIT Vs. Sonal Construction Co. [55 taxmnn.com 425 Gujarat High Court]
M.G.Contractors Pvt. Ltd. Vs. DCIT [Delhi Tribunal]
Anita Builders Vs. ACIT [Jodhpur Tribunal]
Brief Facts of the Case:
The appellant assessee was engaged in the business of crane hiring and maintenance. The assessment was framed by Assessing Officer (‘AO’) u/s 143(3) after making addition, inter-alia, on account of unexplained expenditure u/s 69C of the Act. During the assessment proceedings, pursuant to information obtained from Sales Tax department, certain repair & maintenance items purchased by assessee from five suppliers was treated as bogus and added u/s 69C as unexplained expenditure as the assessee could not produce confirmation from alleged bogus supplier,
This led to initiation of penalty u/s 271(1)(c) and consequently a notice u/s 274 was issued to the assessee which finally resulted into the imposition of impugned penalty.
The AO contested the penalty order but without any success before CIT(A). Aggrieved, the assessee was in appeal before the Tribunal.
Contentions of the appellant assessee:
The assessee placing reliance on various pronouncements contended the show cause notice issued u/s 274 was defective as the relevant clause as applicable to the case of the assessee was not appropriately marked and no specific charge was mentioned therein for which the penalty was being initiated by the AO. On merit it was contended that the AO had wrongly invoked Section 69C to Bogus purchases as the transactions were duly recorded in the books of account and the payments were made through banking channels from accounts which were duly reflected in the books of accounts. Further, the assessee accepted the quantum additions and did not contest the same any further in view of the fact that it could not obtain confirmatory letters from the alleged suppliers as they could not be traced at the relevant time. Nevertheless, the assessee was in possession of purchase invoices, delivery challans, ledger extracts thereof and all the payments were through banking channels. Therefore, the assessee voluntarily offered the quantum additions by filing revised computation of income during quantum proceedings which was in good faith, to buy peace and to avoid any further litigation. The AO had duly accepted the additions offered by the assessee without making any efforts to obtain confirmation from the alleged suppliers. In view of all these factors, the assessee stood good chance of succeeding in quantum appeal, however, it refrained from doing so only to buy peace of mind and avoid further litigation.
Contention of the Respondent Revenue:
Departmental representative placed reliance on Section 292B and contended that mere defect in the notice do not vitiates the penalty proceedings and no prejudice was caused to the assessee by non- marking of appropriate clause. The assessee very well knew the grounds for which he was being penalized and the AO with due application of mind initiated penalty proceedings in quantum assessment for furnishing of inaccurate particulars of income and finally levied the penalty on the same ground. Moreover, the assessee actively contested the penalty proceedings before AO and therefore, the legal grounds, being only hyper-technical in nature, do not carry much weight. Further, on merits, it was pointed that the assessee’s conduct proved the point that the purchases in dispute were bogus and the assessee, on being scrutinized by the revenue, accepted the same and revised the computation of income despite being having the possession of purchase documents. Therefore, the assessee’s contention that the addition was offered voluntarily, to buy peace of mind and to avoid vexed litigation holds no strength.
Observations made by the Tribunal:
On Legal Ground:
It was observed that in the quantum order, AO after due deliberations, clearly initiated the penalty proceedings for furnishing of inaccurate particulars which showed due application of mind qua penalty proceedings. The penalty was finally levied on the same ground as well. Therefore, mere marking of relevant clause, on the facts of the case, had not caused any prejudice to the assessee particularly when the assessee voluntarily offered certain additions in the quantum proceedings with a specific request to AO for not initiating the penalty against the same. The assessee very well knew the charges / grounds for which he was being penalized and he actively contested the penalty before the AO. Also the provisions of Section 292B cured minor defect in the various notices as the notice in substance and effect was in conformity with the intent and purpose of the act.
The ITAT observed that find that first of all Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee.
Further, it was found that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases and a bare perusal of the invoices revealed that the assessee had purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee.
The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels.
The ITAT opined that merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee.
According to the Tribunal, the assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers.
It was held that the overall facts of the case did not justify imposition of penalty and accordingly it was deleted on merits of the case. The appeal of the assessee was allowed.