Tribunal decisions: Limit on bogus purchases addition, penalty deletion upheld

The Tribunal partly allowed the appeal regarding the addition made for bogus purchases, limiting the addition to 10% of the alleged bogus purchases. The Tribunal dismissed the appeal concerning the deletion of the penalty levied u/s.271(1)(c) of the Income Tax Act, upholding the deletion of the penalty due to ambiguity in the charge mentioned during penalty initiation and imposition.

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Issues:
1. Addition made in respect of bogus purchases
2. Deletion of penalty levied u/s.271(1)(c) of the Income Tax Act

Issue 1: Addition made in respect of bogus purchases

The case involved appeals by the Revenue against the Commissioner of Income Tax (Appeals) deleting an addition made for bogus purchases and penalty levied u/s.271(1)(c) of the Income Tax Act. The assessee, engaged in manufacturing electrical equipment, faced survey action revealing alleged bogus purchases. The Assessing Officer added the entire amount of bogus purchases due to lack of supporting documentation. The Commissioner of Income Tax (Appeals) upheld the purchases but limited the addition to 10% of the alleged bogus purchases. The Revenue challenged this decision, arguing that the purchases were not genuine and relied on a Tribunal decision for support.

The assessee contended that payments for the purchases were made through cheques and questioned the lack of efforts by the Assessing Officer to verify the transactions. The Tribunal observed that without purchases, there cannot be sales, and noted the lack of effort from both sides to establish the genuineness of the transactions. It was concluded that while not all purchases were bogus, the assessee failed to prove their genuineness. Referring to a previous Tribunal decision, the addition was restricted to 10% of the alleged bogus purchases over and above the declared GP.

Issue 2: Deletion of penalty levied u/s.271(1)(c) of the Income Tax Act

In the second appeal, the Revenue challenged the deletion of a penalty of a significant amount levied u/s.271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) had deleted the penalty citing ambiguity in the charge mentioned during penalty initiation and imposition. The Assessing Officer initiated the penalty for 'furnishing inaccurate particulars of income' but levied it for 'concealment of income.' The Tribunal highlighted that penalty cannot be imposed on a charge different from the one initiated. Citing a decision of the Hon'ble Bombay High Court, it upheld the deletion of the penalty, as the charge for which the penalty was levied differed from the one initiated.

Ultimately, the Tribunal dismissed the appeal of the Revenue, upholding the deletion of the penalty based on the ambiguity in the charge mentioned during penalty initiation and imposition.

In conclusion, the Tribunal partly allowed the appeal regarding the addition made for bogus purchases and dismissed the appeal concerning the deletion of the penalty levied u/s.271(1)(c) of the Income Tax Act. The judgments were delivered on June 3, 2019, by the Tribunal in Pune.

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