2014 (4) TMI 430 - AT - Income Tax

Tribunal upholds penalty for tax evasion through bogus transactions.

The Income-tax Officer Ward-4(1), Ahmadabad Versus Geera Finance Ltd.

The Income-tax Officer Ward-4(1), Ahmadabad Versus Geera Finance Ltd. - TMI Issues Involved:1. Deletion of penalty levied by the Assessing Officer (A.O.) for bogus transactions.2. Assessment of concealment of income and furnishing inaccurate particulars of income.3. Consideration of revised return filed by the assessee.4. Examination of the genuineness of purchases and sales transactions.5. Application of judicial precedents and relevant case laws.Detailed Analysis:1. Deletion of Penalty Levied by the Assessing Officer (A.O.) for Bogus Transactions:The Revenue's appeal contested the deletion of a penalty amounting to Rs. 4,91,124/- levied by the A.O. The A.O. had imposed this penalty under Section 271(1)(c) of the Income Tax Act for concealment of income and furnishing inaccurate particulars. The A.O. concluded that the assessee had engaged in bogus purchase and sale transactions to reduce its profit and evade tax.2. Assessment of Concealment of Income and Furnishing Inaccurate Particulars of Income:The A.O. completed the assessment under Section 143(3) and observed that the assessee incurred heavy losses in transactions with certain parties. Statements from these parties revealed that no actual goods were exchanged, and the transactions were merely accommodation entries. The A.O. initiated penalty proceedings under Section 271(1)(c) after determining that the assessee had concealed income and furnished inaccurate particulars.3. Consideration of Revised Return Filed by the Assessee:The assessee filed a revised return declaring the bogus loss as additional income after the A.O.'s investigation. The assessee claimed that the revised return was filed to avoid litigation and secure peace of mind, with the condition that no penal action would be taken. However, the A.O. and the CIT(A) viewed this revised return as an admission of the bogus nature of the transactions, made only after the A.O.'s detection.4. Examination of the Genuineness of Purchases and Sales Transactions:The A.O. examined the books of accounts and statements from various parties involved in the transactions. It was found that the transactions were not genuine, and no actual delivery of goods occurred. The A.O. provided opportunities for the assessee to cross-examine the witnesses, which the assessee declined. The CIT(A) noted that the purchases were supported by vouchers and payments made through banking channels, but still upheld the A.O.'s findings of concealment and inaccuracy.5. Application of Judicial Precedents and Relevant Case Laws:The Revenue relied on several judicial precedents, including CIT vs. Usha International Ltd., CIT vs. Lallubhai Jogibhai Patel, A.M. Shah & Co. vs. CIT, and MAK Data (P.) Ltd. vs. CIT, to argue that the penalty was justified. These cases supported the view that revised returns filed after detection of bogus transactions warranted the imposition of penalties under Section 271(1)(c).Conclusion:After considering the submissions and judicial precedents, the Tribunal concluded that the A.O. had established the assessee's involvement in bogus transactions to evade tax. The Tribunal held that the revised return was not voluntary but made under compulsion after the A.O.'s investigation. Therefore, the Tribunal reversed the CIT(A)'s order and upheld the penalty imposed by the A.O. under Section 271(1)(c).Judgment:The appeal by the Revenue was allowed, and the penalty of Rs. 4,91,124/- was reinstated.