TaxTMI 
TaxTMI 
2025 (11) TMI 415
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....53,450/- The Assessing Officer ('A.O.' for short) issued notice under Section 148 of the Act dated 19th July 2013 and commenced re-assessment proceedings on the ground that data is provided by the Sales Tax Department about non genuine purchases from one entity during F.Y. 2009-2010 relevant to assessment year 2010-2011. The assessee responded to the said notice as reproduced below by contending that purchases were genuine and supported by evidence. ".........Purchases in the financial year 2009-2010, relevant to assessment year 2010-2011 from suspicious dealers quantified by VAT department total amounting to Rs. 3,03,561/- details mentioned below Sr. No. Name of Supplier Amount 1 Arbuda Steel 109,715/- 2 Marco Enterprises 193,846/- Total 303,561 Sales tax department was quantified as suspicious dealers. But I purchased material from above mentioned parties which are genuine purchases & payment also made by account payee cheque. We are attached herewith invoice copy, delivery Challan & bank statement showing payment details for your kind consideration. I am government contractor since last 4 years a per the work order I ha....
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....r Sales Tax Department, the A.O had not shared complete information on the basis of which he held that the said purchases by the assessee were not genuine. It was also categorically contended that no opportunity to cross examine the source of adverse evidence was granted to the assessee in spite of specific request made during penalty proceeding, and on such ground it was contended that the principles of equity, fair play and natural justice have been breached. 6. On such backdrop the A.O in the proceedings initiated under Section 271(1)(c) of the Act, levied penalty of Rs. 93,801/- on the disallowance of purchases as recorded in order dated 30th July 2015, and ignoring all the contentions as urged on behalf of the assessee (as noted hereinabove). 7. The assessee being aggrieved by the orders passed by the A.O under Section 271(1)(c) of the Act approached the Commissioner of Appeals in an appeal. By order dated 3rd October 2017 the Commissioner of Appeals dismissed the assessee's appeal. Against such orders passed on the first appeal, the assessee approached the Income Tax Appellate Tribunal in appeal, wherein the assessee has succeeded in terms of what is held in the impugne....
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....e that assessing officer received certain information from sales tax department relating to accommodation entries provided by certain parties and he noticed that one of the party (Coral Trading Co.) issued purchase bills to the assessee and accordingly, the assessment was reopened. Since the assessee has submitted the bills and vouchers in support of his purchase transaction with the above party. However, assessee has submitted before us that assessee is voluntarily agreed for the addition before assessing officer in order to buy peace, accordingly, included the above additional income in its return of income and paid the taxes. However we notice from the penalty order that assessing officer acknowledged that assessee has purchased from the provider of accommodation entry but he has satisfied himself that the assessee has concealed the income or furnished inaccurate particulars. Since assessing officer has levied the penalty in both limbs of the section 271(1)(c) of the act, now assessee is objecting to the above action of the assessing officer. In the similar facts, the Coordinate Bench in the Third member case has held as under: "27. In view of the foregoing discussion, ....
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.... that such approach of the tribunal in any manner can be held to be contrary to law and/or not acceptable. Mr. Sharma has relied on a decision of the Supreme Court in the case of MAK Data (P.) Ltd. Vs. Commissioner of Income Tax-II (2013) 38 taxmann.com 448 (SC), to support his contention that mere voluntary disclosure by the assessee would not prevent the Department from initiating the proceedings under Section 271(1)(c) of the Act. On a perusal of the said decision we find that, it was not a case where any notice under Section 148 of the Act was issued to the assessee by Revenue and in pursuance of which a return was filed. It was also not a case where the A.O intended to rely on materials obtained from Sales Tax Department, which were not furnished to the assessee, as sought to be relied on. Moreover, it was a case where search was conducted on the sister concern of the assessee, and it is in such a situation that the Supreme Court held, that it cannot be said that surrender of income was voluntary. The relevant observations of the Supreme Court read thus: "8. Assessee has only stated that he had surrendered the additional sum of Rs. 40,74,000/- with a view to avoid lit....
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....venue. 14. Considering the contentions as urged by Mr.Sharma and the findings as recorded by the Tribunal, we may refer to the decision of this Court in the case of The Principal Commissioner of Income Tax-6 Vs. Colo Colour Pvt.Ltd. ITXA. 48 of 2022 dated 16th September 2025. In such decision this Court considering the prior decision of the Division Bench of this Court to which one of us (G.S. Kulkarni, J.) was a member in the case of Principal Commissioner of Income Tax-1 Vs. SVD Resins & Plastics Pvt.Ltd. (2025) 474 ITR 151 wherein in similar circumstances, when the A.O had acted upon information received from the Sales Tax Department and without furnishing such information or granting an opportunity to the assessee to respond to such adverse material, which was also in the context of bogus purchases i.e. the A.O not having proved that the purchases were bogus, the Court held that such approach of the A.O was not permissible. The Court in the said decision was also confronted with a notice issued under Section 271(1)(c) on a penalty which was sought to be levied and the Tribunal coming to a similar conclusion that the penalty was not justified, The Tribunal has observed ....
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....information received by the Assessing Officer or his investigation with the Sales Tax Department, when admittedly such material was not furnished to the assessee, there being nothing on record to indicate that the assessee had accepted such material or the investigation as undertaken by the Assessing Officer to accept the purchases to be bogus. Hence, there was no independent application of mind by the Assessing Officer when he appears to have relied on the information of the Sales Tax Department. In this view of the matter, when the Assessing Officer proceeded to estimate the income from the bogus purchases at 12.5%, we do not find that this could be conceived to be a case of concealment of income or a case of inadequate particulars of income being furnished by the assessee. In such context, we may refer to the decision of the Division Bench of this Court in Pr. Commissioner of Income Tax-1 Vs. SVD Resins & Plastics Pvt. Ltd. (2025) 474 ITR 151 to which one of us (G. S. Kulkarni, J.) was a member, wherein the Court held that the information derived by the Assessing Officer from the Sales Tax Department without the same being furnished to the Assessee and not proved, was not a soun....
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....gus transactions. 12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchases being available as the law would recognise before the Assessing Officer, of a nature which would unequivocally indicate that the transactions were wholly bogus. In the absence of such proof, by no stretch of imagination, a conclusion could be arrived, that the entire expenditure claimed by the petitioner qua such transactions need to be added, to be taxed in the hands of the assessee. 13. In a situation as this, the A.O. would be required to carefully consider all such materials to come to a conclusion that the transactions are found to be bogus. Such investigation or enquiry by the Assessing Officer also cannot be an enquiry which would be contrary to the assessments already undertaken by the Sales Tax Authorities on the same transactions. This would create an anomalous situation on the sale-purchase transactions. Hence, in our opinion, wherever relevant any conclusion in regard to the transactions being bogus, needs to be arrived only after the A.O. consults the Sales Tax Department and a thorough enquiry in regard to such specific transaction....
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....) are as follows : "20. We also find that the reliance on behalf of the assessee on the decision of the Gujarat High Court in Vijay Proteins Ltd. Vs. Commissioner of Income-tax is quite apt. In such decision the Division Bench while referring to the decision in Commissioner of Income Tax vs. Krishi Tyre Retreading and Rubber Industries held that penalty could not have been imposed under Section 271(1)(c) of the Act, when the addition was sustained purely on estimate basis or when the addition was made which was on a pure guess work, hence, no penalty under Section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. The Court accordingly answered the question in favour of the assessee, rejecting levy of penalty under Section 271(1)(c). 21. The aforesaid discussion would make us conclude, that the Assessing Officer could not have come to a conclusion of the present case attracting proceedings for levy of penalty, when the Assessing Officer had already taken a position on materials which were available before him in the course of assessment proceedings, in computing the amount of tax payable by the assessee, by making appropriate addit....