2015 (6) TMI 1094 - AT - Income Tax

Tribunal upholds additions for bogus purchases, trading results, but overturns penalty for furnishing inaccurate income particulars

M/s. Ruchi Developers C/o. Piyush Mafatlal Shah Versus The Income Tax Officer Ward-9 (1) Ahmedabad

The Tribunal dismissed the assessee's quantum appeal, upholding the additions related to bogus purchases and trading results. However, the penalty under ... Confirmation of addition made on account of bogus purchases - Held that:- The settled position of law with regard to any expenditure claimed to have been incurred by the assessee, the onus is on the assessee to prove that such expenditure was for the business purpose. In the case in hand, the assessee has claimed certain purchases, however, the assessee has not placed any corroborative details of the raw-material so purchased. Moreover, the purchases so made from the parties could not be verified by the AO. The AO has made efforts by sending letters to the given address, but the letters so sent and the information as sought by the AO was not furnished by the assessee or the parties concerned. - Decided against assessee Claim of higher remuneration payable to partners as per section 40(b)(v)(2) - Held that:- Admittedly, the assessee has not made the claim in the original return in respect of the higher remuneration payable to the partners. The assessee has not revised its return and no correction has been made in the account. We find that the ld.CIT(A) has rejected the ground on the basis that the ground has been raised as an afterthought to negate the tax made by the AO. Therefore, the assessee cannot blow hot and cold, therefore, we do not see any infirmity in the order of the ld.CIT(A), same is hereby upheld - Decided against assessee Penalty levied u/s 271(1)(c) - addition of account of bogus purchases - Held that:- The assessee has also placed on record the confirmations by the concerned parties. The AO made addition on the basis that the assessee failed to produce the parties. However, other details in the nature of PANs and confirmations of concerned parties were furnished. Under these facts, we are unable to accept the argument of Revenue, since the AO has not made further enquiry to verify the correctness of confirmations. It is settled law that the quantum proceedings and the penalty proceedings are two separate proceedings. Even if addition is sustained, it is not necessary that penalty would automatically be sustained. If the assessee is able to demonstrate that under the given facts, penalty should not be sustained in the light of judicial pronouncements and the statutory provisions. - Decided in favour of assessee Issues Involved:1. Time-barred assessment order under Section 143(3).2. Addition of Rs. 1,04,16,233/- as bogus purchases.3. Ignoring specific grounds of appeal regarding trading results.4. Addition of Rs. 1,04,16,233/- without rejecting the books under Section 145.5. Dismissal of additional ground for higher remuneration to partners under Section 40(b)(v)(2).6. Interest charged under Sections 234-B and 234-C.7. Penalty under Section 271(1)(c).Detailed Analysis:1. Time-barred Assessment Order under Section 143(3):The first issue raised by the assessee was that the assessment order dated 24-12-2009 was time-barred. However, this ground was not pressed by the assessee's counsel and was dismissed accordingly.2. Addition of Rs. 1,04,16,233/- as Bogus Purchases:The assessee contended that the CIT(A) erred in confirming the addition of Rs. 1,04,16,233/- as bogus purchases from five parties. The AO made this addition on the basis that the assessee failed to establish the purchases with corroborative evidence despite several opportunities. The AO noted discrepancies such as returned letters from postal authorities, lack of CST/GST/VAT registration, and the inability to produce the creditors. The Tribunal upheld the CIT(A)'s decision, stating that the assessee did not maintain quantitative details and failed to verify the purchases, thereby dismissing the grounds related to bogus purchases.3. Ignoring Specific Grounds of Appeal Regarding Trading Results:The assessee argued that the CIT(A) ignored specific grounds of appeal reflecting abnormal trading results after the addition of Rs. 1,04,16,233/-. The Tribunal found no infirmity in the CIT(A)'s order, as the assessee failed to provide sufficient evidence to prove the genuineness of the purchases.4. Addition of Rs. 1,04,16,233/- Without Rejecting the Books under Section 145:The assessee claimed that the addition was made without rejecting the books under Section 145. The Tribunal dismissed this ground, supporting the AO's observation that the assessee did not maintain quantitative details and failed to verify the purchases.5. Dismissal of Additional Ground for Higher Remuneration to Partners under Section 40(b)(v)(2):The assessee raised an additional ground for higher remuneration payable to partners, which was dismissed by the CIT(A) on the basis that it was an afterthought to negate the tax addition. The Tribunal upheld this decision, stating that the assessee did not revise its return or correct the accounts to reflect the higher remuneration.6. Interest Charged under Sections 234-B and 234-C:The assessee contested the interest charged under Sections 234-B and 234-C. The Tribunal held this ground as consequential and dismissed the quantum appeal.7. Penalty under Section 271(1)(c):The AO levied a penalty of Rs. 35,06,103/- under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) confirmed this penalty, but the Tribunal found that the assessee had provided addresses, PANs, and confirmations of the concerned parties. The Tribunal cited judicial precedents, emphasizing that penalty proceedings are separate from quantum proceedings and that the addition alone does not justify the penalty. The Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty.Conclusion:The Tribunal dismissed the assessee's quantum appeal but allowed the penalty appeal, directing the AO to delete the penalty imposed under Section 271(1)(c).