INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Bogus purchases - Whether merely on the basis of unproved claim of purchases, penalty under section 271(1)(c) can be levied -

Assessee was engaged in the business of a civil contractor. AO observed that assessee had obtained accommodation entries in the form of purchases from certain bogus concerns which were in the business of providing bills without delivery of goods, etc. in exchange of cash or commission basis. In order to verify the genuineness and veracity of purchase transactions, AO directed assessee to furnish certain details along with copies of purchase bills in respect of the impugned purchases made from the parties. In compliance, assessee furnished copies of the purchase bills, ledger accounts. However, AO held a conviction that details/documents furnished by assessee in the form of purchase bills and bank statements, etc. did not substantiate the genuineness of the purchase transactions in question to the hilt. Accordingly, AO imposed penalty under section 271(1)(c). Held: AO had declined to accept the authenticity of the purchase transactions under consideration, for the reason that documentary evidence produced by assessee did not substantiate the authenticity of the same to the hilt. It was found that addition made by AO was merely backed by an unproved claim of assessee, and not a claim which was disproved to the hilt on the basis of irrefutable documentary evidence by revenue. Unproved purchases would justify an addition in the hands of assessee, however, merely on the said standalone basis, no penalty under section 271(1)(c) could have been validly imposed. Since Revenue had failed to disprove to the hilt on the basis of clinching documentary evidence and authenticity of the claim of the assessee of having made purchases from the aforementioned parties, therefore, merely on the basis of the unproved claim of purchases, no penalty under section 271(1)(c) could have been validly imposed on the assessee.

Followed:CIT v. U.P. State Bridge Corporation Ltd. 2018 TaxPub(DT) 5720 (All-HC) CIT v. Upendra V. Mithani (ITA (L) No. 1860 of 2009), dated 5-8-2009) : 2013 TaxPub(DT) 2018 (Bom-HC) Paresh Bhavanji Vora v. Dy. CIT [I.T.A. No. 6105/Mum/2016, dt. 30-8-2017] CIT v. U.P. State Bridge Corporation Ltd (2018) 97 Taxman.com 279 (SC) : 2018 TaxPub(DT) 5578 (SC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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