2023 (1) TMI 475 - AT - Income Tax

Assessee's Appeals Dismissed, Assessment Order Upheld

Sabara Impex Ltd. C/o G.P. Mehta & Co. CAs. Versus ITO, Ward-2 (3) (2), Mumbai

Sabara Impex Ltd. C/o G.P. Mehta & Co. CAs. Versus ITO, Ward-2 (3) (2), Mumbai - TMI Issues Involved:1. Legality of the assessment order under section 147 of the IT Act, 1961.2. Addition of Rs 2,40,75,750/- under section 68 as income from other sources.3. Restriction of deduction under section 80HHC of the IT Act, 1961.4. Imposition of penalty under section 271(1)(c) of the IT Act, 1961.Detailed Analysis:1. Legality of the Assessment Order under Section 147:The assessee challenged the legality of the assessment order passed under section 147, arguing that the notice was not served in accordance with the law and no speaking order was passed on objections against the notice under section 148. The Tribunal observed that the Assessing Officer (AO) provided opportunities to the assessee to file objections and dealt with them through a speaking order. The AO followed the ITAT's directions by supplying the reasons for reopening and established valid grounds for reopening. Thus, grounds 1, 2, and 3 raised by the assessee were dismissed as baseless.2. Addition of Rs 2,40,75,750/- under Section 68:The AO made an addition of Rs 2,40,75,750/- by invoking section 68, treating it as income from other sources. The Tribunal noted that the assessee engaged in fictitious trading of pharmaceutical goods without actual delivery. Statements recorded from key individuals, including the directors, confirmed that the transactions were accommodation entries without genuine movement of goods. The assessee failed to substantiate the genuineness of the transactions, as there was no evidence of payment, movement of goods, or confirmation of credit balances. The Tribunal upheld the AO's action under section 68, treating the sales receipts as cash credits, and dismissed ground 4.3. Restriction of Deduction under Section 80HHC:The assessee contested the restriction of deduction under section 80HHC to Rs 33,41,195/- instead of the claimed Rs 1,06,98,507/-. The Tribunal found that the AO had dealt with this issue in detail in the original order and the CIT(A) had confirmed the AO's decision. No new material or evidence was presented by the assessee to warrant a change in the decision. Therefore, the Tribunal confirmed the order of the CIT(A) and dismissed ground 5.4. Imposition of Penalty under Section 271(1)(c):The assessee argued that the penalty under section 271(1)(c) was wrongly imposed, as there was no material evidence of concealment or furnishing inaccurate particulars of income. The Tribunal noted that the penalty proceedings are separate from assessment proceedings and mere addition in quantum proceedings does not automatically result in penalty. However, in this case, the Tribunal found that the assessee had booked bogus purchases and sales, introducing its own money through sales channels, which was chargeable to tax under section 68. The Tribunal observed that the assessee did not provide a bona fide explanation for the false transactions recorded in the books. The Tribunal upheld the penalty, noting that the assessee's actions amounted to furnishing inaccurate particulars and concealing income. The Tribunal dismissed all grounds raised by the assessee in the penalty appeal, confirming the imposition of penalty.Conclusion:The Tribunal dismissed both appeals filed by the assessee, confirming the legality of the assessment order under section 147, the addition under section 68, the restriction of deduction under section 80HHC, and the imposition of penalty under section 271(1)(c). The Tribunal found that the assessee failed to substantiate the genuineness of transactions and provided inaccurate particulars of income, justifying the actions taken by the lower authorities.