TMI Blog2000 (10) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... ide Bill No. 1231, dt. 3rd Oct., 1985, and Bill No. 1261 dt. 4th Oct., 1985, amounting to Rs. 30,170 each. As the assessee failed to establish the identity of this party and the enquiries made by the AO also revealed that no such party was in existence, he considered the purchase of bitumen as bogus purchase and accordingly the addition to the extent of Rs. 60,340 was made in the total income of the assessee. This matter was contested by the assessee in the first appeal before the CIT(A) who confirmed this addition in the quantum appeal. Consequently, this bogus purchase was considered by the AO as an attempt by the assessee to reduce the taxable income and treated the same as concealment considering that the assessee had manipulated profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ITO (1991) 40 TTJ (Bom) 600 : (1991) 38 ITD 249 (Bom). He further submitted that the fact of purchase of bitumen was not disputed by the AO. He also submitted that the assessee executed a contract for construction of road during the relevant period and it is an undisputed fact that without bitumen, the road cannot be constructed. He further submitted that the assessee claimed a total expenditure of Rs. 69,745 on purchase of bitumen and considering the contract receipts of around Rs. 18 lakhs, on account of construction of roads, such expenses were quite reasonable notwithstanding the fact that the identity of the supplier was not established. He also referred to para 7 of the assessment order and drew our attention towards the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount represented income of the assessee and the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars. For this contention, he relied on the following judgments: (i) CIT Anr. vs. Anwar Ali (1970) 76 ITR 696 (SC); (ii) Anantharam Veera Singhaiah Co. vs. CIT (1980) 16 CTR (SC) 189 : (1980) 123 ITR 457 (SC); and (iii) CIT vs. Dharam Chand L. Shah (1993) 113 CTR (Bom) 214 : (1993) 204 ITR 462 (Bom). He further submitted that in this case books were rejected and the trading addition was sustained by application of net profit rate and contended that in such cases, it cannot be presumed that the assessee has concealed the income so as to attract the provisions of s. 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hearing. We have also gone through the various cases cited by the learned counsel for the assessee, the ratios of which further substantiate the settled legal position pertaining to levy of penalty as outlined below: (a) The penalty proceedings are independent of assessment proceedings. Before levy of penalty under s. 271(1)(c), the AO has to establish that there was concealment or furnishing of inaccurate particulars of income on the part of the assessee. (b) It is necessary to establish conscious concealment for levy of penalty under s. 271(1)(c); (c) Penalty cannot be levied simply because addition is sustained in quantum proceedings. It would be perfectly legitimate to say that the mere fact that the explanation of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is existence at the addresses given in the bills. He, therefore, concluded that the bills as well as the party were bogus and accordingly addition of Rs. 60,340 was made in the total income of the assessee. The matter of quantum addition was carried before the CIT(A) who considered both these additions as inter-related and confirmed the additions to the extent of Rs. 60,340 by observing as under: "I have considered the facts and submissions made admittedly the books of account maintained are defective in nature and as such the AO was justified in rejecting the same by applying provisions of s. 145. As regards the additions made, it is mentioned that in the case of road contractors, the net profit rate is applied from 10 per cent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to establish the purchase of bitumen. The fact that the assessee having executed contract for construction of road was required to use the bitumen has not been controverted by the AO during the assessment proceedings. From the consideration of all the facts of the case, the conclusion that automatically flows is that the addition on account of expenses on bitumen made by the AO and confirmed by the CIT(A) cannot constitute real income, let alone the concealed income, of the assessee. The addition has been made in this case merely on account of the assessee s failure to establish the identity of the supplier. Moreover, this addition has not been sustained separately in the appellate proceedings as mentioned hereinabove. We are, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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