2005 (6) TMI 205 - AT - Income Tax

Tribunal upholds penalty for fictitious purchases, assessee admits wrongdoing, appeal dismissed

The Tribunal upheld the imposition of penalty under section 271(1)(c) of the Income-tax Act on the assessee for fictitious purchases from M/s. Surya ... For Concealment Of Income Issues Involved:1. Legitimacy of purchases from M/s. Surya Enterprises and M/s. Ambika Trading Co.2. Imposition of penalty under section 271(1)(c) of the Income-tax Act.3. Admission and agreement to the levy of penalty by the assessee.4. Satisfaction of the Assessing Officer in recording concealment of income.5. Competency of the appeal against the penalty order.Detailed Analysis:1. Legitimacy of Purchases:The Assessing Officer (AO) scrutinized the purchases made by the assessee from M/s. Surya Enterprises and M/s. Ambika Trading Co. For M/s. Surya Enterprises, the summons under section 131 were returned unserved, indicating the firm did not exist. Further, truck owners denied transporting wheat for M/s. Surya Enterprises, and the AO found discrepancies in the truck records. In the case of M/s. Ambika Trading Co., its proprietor confessed that no genuine sales were made, and all bills issued were fictitious. The AO concluded that the assessee made fictitious purchases from these parties, leading to a suppression of sales and an estimated profit of Rs. 3,50,000 escaping assessment.2. Imposition of Penalty:The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee, in its response, did not provide a satisfactory explanation to counter the findings of the AO. Instead, the assessee attributed the discrepancies to the actions of its employees and agreed to the levy of penalty to 'buy peace of mind.' The AO imposed the penalty, which was later upheld by the CIT(A).3. Admission and Agreement to Levy of Penalty:The CIT(A) noted that the assessee, including its authorized representatives, agreed to the additions and the levy of penalty. The CIT(A) relied on the judgment of the Punjab and Haryana High Court in the case of Banta Singh Kartar Singh v. CIT, which held that an order based on an agreement cannot give rise to grievances that can be agitated in appeal. The CIT(A) dismissed the appeal, stating that the assessee had no grievance against the penalty since it was agreed upon.4. Satisfaction of the Assessing Officer:The AO recorded his satisfaction regarding the concealment of income and the furnishing of inaccurate particulars in the assessment order. The AO's findings were based on extensive inquiries and material evidence, which the assessee failed to rebut. The AO's satisfaction was deemed sufficient to initiate penalty proceedings under section 271(1)(c).5. Competency of the Appeal:The assessee's counsel argued that the penalty was imposed without proper satisfaction and that the CIT(A) should have decided the appeal on merits. However, the CIT(A) and the Tribunal found that the assessee had admitted to the discrepancies and agreed to the penalty, thus nullifying any grounds for appeal. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee's agreement to the penalty precluded any grievance.Conclusion:The Tribunal dismissed the appeal, confirming that the penalty under section 271(1)(c) was rightly imposed. The assessee's agreement to the penalty and the AO's satisfaction regarding the concealment of income were pivotal in upholding the penalty. The Tribunal found no merit in the assessee's arguments and affirmed the orders of the lower authorities.