The Tax Publishers2020 TaxPub(DT) 0299 (Sur-Trib)

INCOME TAX ACT, 1961

Section 271(1)(c)

AO had estimated the income on the bills of purchases of diamonds and merely because assessee's explanation was not found acceptable by AO, it did not follow that assessee was unable to substantiate his explanation by providing various evidences, therefore, penalty was not sustainable.

Penalty under section 271(1)(c) - AO made disallowance @25% of bogus purchases - Imposition of -

A search and seizure operation was carried out in the case of a group concern wherein it was revealed that said group was providing accommodation entries to various concerns. Assessee had also received accommodation entries from the concerns controlled by the said group concern. Therefore, purchases were treated as bogus on the basis of statement recorded during the course of search and seizure proceedings. AO disallowed @25% of said bogus purchases and penalty was also initiated under section 271(1)(c) for furnishing of inaccurate particulars of income and concealment of income. Held: As purchases were not made from bills providers as it was evident that purchases were made from the third party. Since goods were exported the same were routed through customs authorities hence, the corresponding sales are not in dispute. Purchase amount was not verifiable and as such 5% profit rate on bogus purchases was applied by Tribunal. AO had estimated the income on the bills of purchases of diamonds. Just because assessee's explanation was not found acceptable by AO, it did not follow that assessee was unable to substantiate his explanation by providing various evidences and judicial opinions. Therefore, penalty was not sustainable merely because assessee claimed the expenditure, which claim was not accepted by Revenue.

REFERRED : CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) : 2010 TaxPub(DT) 1683 (SC) Dilip N. Shroff v. Jt. CIT & Anr. (2007) 291 ITR 519 (SC) : 2007 TaxPub(DT) 1247 (SC) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) : 1980 TaxPub(DT) 1130 (SC) Mayank Diamonds Pvt. Ltd. v. ITO [Tax Appeal No. 200 of 2003, dt. 17-11-2014] CIT v. Mahendra Singh Khedla (2012) 252 CTR 453 (Raj) : 2012 TaxPub(DT) 2850 (Raj-HC) New Sorathia Engineering Co. v. CIT (2006) 282 ITR 642 (Guj) : 2006 TaxPub(DT) 1265 (Guj-HC) Harigopal Singh v. CIT (2002) 258 ITR 85 (P&H) : 2002 TaxPub(DT) 1625 (P&H-HC) A.M. Shah & Co. v. CIT (1999) 238 ITR 415 (Guj) : 1999 TaxPub(DT) 0819 (Guj-HC)

FAVOUR : In assessee's favour

A.Y. : 2007-08

INCOME TAX ACT, 1961

Section 271(1)(c)

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT