TaxTMI 
TaxTMI 
2010 (4) TMI 872
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....sions of the Act, after making certain additions and disallowances, which include an addition of Rs. 25,88,026 made on account of bogus cash purchases. While the CIT(A) on appeal against the said original assessment, deleting the disputed addition which led to the impugned penalty, and partly allowed the appeal of the assessee, when the Revenue carried the matter in further appeal, the Tribunal set aside the matter to the file of the Assessing Officer, with certain directions to reframe the assessment, vide order dated 17-6-2002. In the fresh assessment order dated 18-3-2004 made in pursuance of the directions of the Tribunal, the Assessing Officer repeated once again the additions made earlier and completed the assessment on a revised taxable income of Rs. 23,15,595, vide order of assessment dated 18-3-2004, passed under section 143(3) read with section 251 of the Act. While thus completing the assessment once again, the Assessing Officer initiated the proceedings for levy of penalty for concealment under section 271(1)(c) of the Act. Consequent upon receipt of the order of the CIT(A) in quantum proceedings, whereby the additions made by the Assessing Officer in the assessment ord....
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.... the purchases could be traced. However, in spite of giving repeated reminders asking him to produce the inward register reflecting the receipt of cash purchases, the same was not produced for verification of the Assessing Officer. Moreover, as per the assessee's statement, Mr. Sherif Ahmed, Purchase Manager, was given advances regularly for purchase of raw material. However, from ledger page No. 221 which is an advance amount of Mr. Shafeeq Ahmed, it is observed that this amount was written at one stage on the 1st day of accounting year and the other entries were written on day-to-day basis. Hence, the claim of the assessee that the advances were given over a period of time proved to be false and misleading. Further, several interpolations and corrections were made in the cash book in order to create evidence that purchase advances were given from time to time. For example, on April 30th Rs. 1,20,000 were stated to have been given as an advance. The said entry was inserted in cash book on page No. 89. The cash balance carried over to the next page was also corrected. The cash balance carried forward originally was Rs. 5,47,827 against the corrected figure of Rs. 4,27,827. ....
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.... filed by the assessee dated nil received on 10-1-1992, the purchases made by Mr. Jaffar Hasan were to the tune of Rs. 8,26,265. In conclusion, against the advances given by the company of Rs. 4,26,365, the Director made purchases to the tune of Rs. 8,26,265. This obviously, leads to conclusion that there was not enough of cash balance and the Director must have brought the money outside the books of account in order to account for the purchases to the tune of Rs. 8,26,265." 4. In the light of the above, the Assessing Officer noted that the assessee made a deliberate and systematic attempt to inflate the purchases to reduce the taxable profits. He also noted that the sellers have not confirmed the sales made by them to the assessee and the assessee also could neither produce any evidence to show that the materials were actually purchased and received and for that matter chose not to produce the relevant raw material receipts register. The Assessing Officer further noted that even during the re-assessment proceedings that ensued in pursuance of the order of the Tribunal, assessee could not adduce any fresh evidence which goes against the conclusions arrived at in the original ass....
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....being so, the issue relating to the addition is a debatable one on which two views are possible and therefore, the impugned penalty is not justified. He further submitted that documentary evidence such as books of account, purchase bills, vouchers, confirmation letters, stock registers and way bills were furnished from time to time since the original assessment proceedings to show that the purchases are genuine. Without considering the same the lower authorities were not justified in levying/confirming the impugned penalty for concealment. He also submitted that the assessee has furnished all the material evidence in support of the cash purchases, and as such the CIT(A) was not justified in holding that the Assessing Officer provided the material gathered to the assessee and that the assessee failed to give explanation. The learned counsel for the assessee strongly relying on the earlier order of the CIT(A) in quantum proceedings dated 6-11-1992 and submitted that the assessee has furnished exhaustive details and the appellate authority satisfied himself with all these documents furnished in support of the purchases and allowed the appeal in view of the fact that the entire purchas....
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....enalty of Rs. 15,00,000 under section 271(1)(c) of the Act, has been levied with reference to the addition of Rs. 25,88,026 made on account of unproved cash purchases. For levying of penalty under section 271(1)(c) of the Income-tax Act, it is to be found that the assessee has concealed the particulars of income or as furnished inaccurate particulars of such income. It is thus necessary that before penalty is levied under section 271(1)(c) of the Act a clear cut findings must be recorded in the penalty order that the assessee had been guilty of concealment or furnishing inaccurate particulars. This being a penal provision, the onus clearly lies upon the department to bring on record the guilt of the assessee. Whenever income returned by the assessee is enhanced by the Assessing Officer the penal provision is not automatically attracted. The penal provision is applicable only if the enhancement is on account of some income with the assessee is found to have earned and concealed. The purpose of this section is to provide, a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deter....
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....icer not accepted the genuineness of the transactions since the Assessing Officer wanted inward Register and stock registers and the Assessing Officer not discovered any positive material of inflating of purchases. There were certain insertion of entries in the cash book and also correction in the cash balance made by the assessee in its books of account and according to Assessing Officer these books of account of the assessee are not reliable. This finding is enough to make additions in the assessment proceedings but that itself is not enough to sustain the penalty. It is to be true that even in cases of estimation or in case of best judgment penalty is leviable. But there should be finding has to be recorded that the difference in the income return and the income assessed is due to the fraud or gross or wilful neglect on the part of the assessee. In the instant case, the lower authorities have not recorded any such findings. The books of account of the assessee not wholly amenable to verification. That at best can only lead to inference that the result shown by the assessee are inconclusive. But that is far from saying that there is any fraud or gross or wilful neglect on the par....