1981 (1) TMI 99 - AT - Income Tax

Summary

Issues:
1. Assessment of alleged bogus purchases by the assessee.
2. Imposition of penalty under section 271(1)(c) of the Act.
3. Appeal against the penalty order by the assessee.
4. Discharge of onus to prove correct income by the assessee.
5. Validity of penalty imposition based on fraudulent purchases.

Analysis:

1. The appeal dealt with the assessment of alleged bogus purchases by the assessee, a firm engaged in the manufacture and sale of chappals. The Income Tax Officer (ITO) added Rs. 15,673 to the total income of the assessee, considering the purchases as bogus to suppress profits. The Assessing Officer of Income-tax upheld this addition, leading to the initiation of penalty proceedings under section 271(1)(c) of the Act.

2. The ITO imposed a penalty of Rs. 18,175 on the assessee for furnishing inaccurate particulars of income and concealing income. The penalty order was challenged by the assessee before the Appellate Assistant Commissioner (AAC), who canceled the penalty citing lack of proof that the amounts added represented concealed income. The AAC emphasized that the purchases were supported, payments were made by cheques, and the partner's unexplained cash credit did not warrant a penalty.

3. The Departmental Representative argued before the Tribunal that the assessee failed to prove the correct income and discharge the onus, as the returned income was significantly lower than the assessed income. The Deptl. Rep. contended that the findings of the AAC in the penalty appeal contradicted those in the quantum appeal, urging rejection of the penalty cancellation.

4. The Tribunal observed that the Explanation to section 271(1)(c) was attracted as the returned income was substantially less than the assessed income. The onus was on the assessee to prove no fraud or neglect in reporting income, which the assessee failed to discharge by not appearing or providing evidence. The Tribunal noted discrepancies in the purchases, supporting the imposition of the penalty.

5. Ultimately, the Tribunal held that the alleged purchases were indeed bogus, as confirmed by the tax authorities. The Tribunal agreed with the tax authorities' assessment that the purchases were fraudulent, leading to the imposition of the penalty. Citing legal precedent, the Tribunal allowed the appeal by the Revenue, upholding the penalty imposition on the assessee for fraudulent purchases.