2021 (1) TMI 1034 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus purchases disallowed - HELD THAT - Assessee is unable to produce the actual delivery/physical delivery of goods but it is a fact that the AO has not doubted the sales made by assessee or even the payments were made by account payee cheques. Once this is a fact that once sales are not doubted, the entire purchases cannot be considered as bogus and that is also a presumption. Mere on presumption, penalty cannot be levied. Hence, we confirmed the order of CIT(A) deleting the penalty and dismissed this appeal of revenue.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act.

Analysis:

Issue 1: Deletion of Penalty
The appeal was against the deletion of penalty under section 271(1)(c) of the Income Tax Act by the Commissioner of Income Tax (Appeals) (CIT(A)). The Assessing Officer had levied the penalty based on the assessee's alleged failure to prove the genuineness of purchases from Hawala parties. The grounds raised by the revenue included the failure of the assessee to produce the alleged bogus parties for verification and the clear intention to reduce taxable income. The penalty was also based on information received from the Sales Tax Department of the Government of Maharashtra regarding bogus purchase bills. The Assessing Officer had ex-parte levied the penalty, citing the lack of contestation by the assessee and an admission of concealment of income. However, the CIT(A) deleted the penalty, emphasizing that the penalties were merely on disallowance of purchases and not on concealment or mala-fide intention to reduce taxable income. The CIT(A) found that the additions made on account of disallowance of purchases as bogus did not justify the penalties under section 271(1)(c) of the Act. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer had not doubted the sales made by the assessee or the payments made by account payee cheques. The Tribunal concluded that mere presumption of bogus purchases was insufficient to levy the penalty, especially when sales were not in question. Therefore, the Tribunal confirmed the deletion of the penalty by the CIT(A) and dismissed the revenue's appeal.

Final Decision:
The Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Income Tax Act, as the mere presumption of bogus purchases without questioning the genuine sales made by the assessee was insufficient to justify the penalty. The appeal by the revenue was dismissed, and the order pronounced on 22nd January 2021.