INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD

ITA No. 1401/Hyd/2014 Assessment Year: 2006-07
Swati Pearls & Jewellers (Appellant) vs Dy. Commissioner of Incometax (Respondent)
Date of Order: 04-12-2015

ORDER

PER S. RIFAUR RAHMAN, A.M.:
This appeal is preferred by the assessee against the order of ld. CIT(A) - V, Hyderabad, dated 28/03/2015 for the AY 2006-07.

2. Brief facts of the case are, for the AY 2006-07, assessee had filed its return of income declaring total income of Rs. 29,518 from business of jewellery trading with the status of firm. The case was reopened on the specific information from the Jaipur Investigation Wing that the assessee had made bogus purchases from M/s Vijay Gems, Jaipur bearing bill No. 83, dated 09/03/2006 for Rs. 5,92,973/-. This was brought to the knowledge of the assessee by the department. Due to the fact that it was not verifiable and assessee agreed to file revised return of income for the AY 2006-07 admitting the above purchases as additional income, declared the taxable income of Rs. 6,22,490. Subsequently, notice u/s 148 was issued. In response to the notice u/s 148, assessee replied back to consider the revised return of income filed admitting additional income as return of income filed in response to notice u/s 148. The assessment was completed u/s 143(3) r.w.s. 147 of the Act, considering the taxable income at Rs. 6,22,490.

3. Since, the assessee filed revised return of income admitting the same as additional income, the AO treated the additional income as concealed income considering the fact that only after the finding of the bogus purchases by the department, assessee accepted and filed the revised return of income. Hence, penalty of Rs. 1,99,600 was levied by the AO u/s 271(1)(c) of the Act.

4. Aggrieved with the above order, assessee filed appeal before the CIT(A). The CIT(A) had dismissed the appeal of the assessee by observing as under:

“6. In this case, it can be clearly held that the appellant concealed the bogus purchase of Rs. 5,92,973 and offered the same in the revised return of income only subsequent to detect ion of the same by the department during the scrutiny proceedings for the AY 2008-09.

6.1 For my above observations, I do not find any infirmity in the action of the AO levying penalty of Rs. 1,99,600, and hence, I confirm the same. ”

5. The ld. AR prayed to file additional grounds of appeal. On verification, it was noticed that the additional grounds were not relating to the appeal under consideration i.e. penalty u/s 271(1)(c) of the Act. The additional grounds were relating to the reopening proceedings initiated by the AO and order u/s 143(3) r.w.s. 147. The additional grounds were rejected, as they were irrelevant considering the  present appeal under consideration are relating to penalty u/s 271(1)(c) of the Act.

6. Ld. AR submitted that the assessee had accepted to offer the additional income to buy peace with the department and further litigation. He further submitted that the penalty cannot be levied, when the assessee accepts to offer as the additional income and files revised return of income voluntarily to buy peace. He relied on the following case laws:

1. ACIT Vs. Ashok Raj Nath, [2013] 33 Taxmann.com 588 (Delhi Trib.)
2. ACIT Vs. Prem Chand Garg, [2009] 31 SOT 97 (Delhi) (TM)

7. Ld. DR relied on the order of CIT(A).

8. After considering the submissions made by both the sides and perusing the material facts on record, it is observed that there is no doubt that the assessee had filed revised return of income and accepted the bogus purchase as additional income since the assessee was not in a position to verify the same and accepted the addition to avoid unnecessary litigation, but, on record assessee made the payment for the purchases only through cheque. Moreover, assessee accepted the addition during the course of assessment proceeding. Considering the fact that the survey was conducted in Jaipur and some information was received from Jaipur Investigation Wing that the assessee had involved in purchase of Gems from Vijay Gems. The ld. AR submitted that the assessee had accepted the addition only to buy peace and avoid litigation.

9. Ld. AR submitted, penalty cannot be levied because assessee accepted the additional income to avoid unnecessary litigation by relying on the decision in case of ACIT Vs. Ashok Rajnath (supra). In the said case, the assessee filed voluntarily the revised return of income beyond the time prescribed u/s 139(5) of the Act. The AO accepted the revised return and also levied the penalty u/s 271(1)(c). As far as other case of ACIT Vs. Prem Chand Garg is concerned, this is in relation to the proceedings u/s 153. Notice was issued to the assessee seeking information relating to receipt of gifts. There was no specific enquiry from the AO in this aspect nor detection of any evidence. The assessee voluntarily agreed to offer the gifts as additional income.

10. In the present case, the assessee had accepted the bogus purchase as additional income voluntarily due to the fact that assessee was not in a position to substantiate the claim, even though, the transaction was made through banking channel. The assessee had declared the additional income voluntarily and filed return of income, which the AO accepted the revised return of income to complete the assessment u/s 143(3) r.w.s. 147. By applying the ratios of the above cited judgments, we are inclined to note that the assessee filed the revised return of income which was duly accepted by the AO. From the above observations, it is clear that the assessee had neither concealed the particulars of the income nor furnished inaccurate particulars of such income. Hence, this is not a fit case to attract penalty proceedings u/s 271(1)(c) of the Act.

11. In the result, appeal of the assessee is allowed.

Pronounced in the open court on 4th December, 2015.

(P. MADHAVI DEVI)     (S. RIFAUR RAHMAN)
JUDICIAL MEMBER    ACCOUNTANT MEMBER