Input tax credit on suppressed purchases denied, while penalty for evaded tax was reduced to the actual tax sought to be evaded.

Input tax credit was denied on purchases suppressed from the books of account, because credit is not available on a bill-to-bill basis where the transactions are outside the regular records, even if some invoices show tax collection. The penalty issue was confined to whether the amount should match the actual tax sought to be evaded, and the penalty was reduced to that extent. The findings on suppression and denial of input tax credit were maintained, while the penalty was moderated in favour of the assessee.

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Issues: (i) Whether input tax credit was admissible in respect of purchases that were suppressed and not reflected in the books of account. (ii) Whether the penalty imposed for tax sought to be evaded should be confined to the actual tax sought to be evaded instead of one and a half times thereof.

Issue (i): Whether input tax credit was admissible in respect of purchases that were suppressed and not reflected in the books of account.

Analysis: The purchases in question were not recorded in the books of account and were treated as suppressed turnover. In such circumstances, input tax credit could not be granted on a bill-to-bill basis merely because tax collection was evidenced on some invoices. The Court also relied on the settled view that credit is unavailable when the purchases are outside the regular accounts.

Conclusion: Input tax credit was not admissible and the answer was against the assessee.

Issue (ii): Whether the penalty imposed for tax sought to be evaded should be confined to the actual tax sought to be evaded instead of one and a half times thereof.

Analysis: The Tribunal had restricted the penalty to one and a half times the tax sought to be evaded. Considering the facts and circumstances, the Court found that further interference was not warranted beyond reducing the penalty to the actual tax sought to be evaded.

Conclusion: The penalty was confined to the actual tax sought to be evaded, in favour of the assessee.

Final Conclusion: The revision succeeded only to the limited extent of reducing the penalty, while the findings on suppression and denial of input tax credit were maintained.

Ratio Decidendi: Input tax credit is not available on purchases suppressed from the books of account, and penalty for evaded tax may be moderated to the extent justified by the facts.

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