TMI Blog1994 (4) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------- Rs. 72,868.00 --------------------------- The assessee-company fabricated such evidence in the form of bogus purchase bills, delivery memos and receipt of payments shown to have been made to them. The ITO observed that purchase invoices, delivery memos etc. produced in support of purchases made from the aforesaid six parties were bogus and fabricated documents. Addresses given on these invoices were vague and incorrect. All those bills appeared to have been got printed at the same printing press, they were of the same size, same colour and the block 'Rs.' printed on bill of these 6 different suppliers was exactly similar which indicate that all these bills were got printed by the assessee and were fabricated by the assessee in the names of these six different parties. The assessee could not produce any confirmation from these parties. The registered letters sent by the ITO at the given addresses were returned back by the postal authorities. The Inspector of Shops and Establishments, Municipal Corporation also confirmed that no such dealers ever existed at the given addresses as per records of their office. The ITO further pointed out various disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.00 153/6 Reed Wire ---------------------------- Rs. 28,517.50 ---------------------------- The learned ITO made disallowance of Rs. 28,517 under section 40A(3) of the Act. An other addition of Rs. 38,242 was made by the ITO on account of Incentive Bonus. On appeal, the CIT(A) confirmed the above additions. The ITO initiated penalty proceedings under section 271(1)(c) for concealment in respect of above three additions and after giving an opportunity of being heard to the assessee, the ITO levied a penalty of Rs. 1,57,588. 3. The assessee had challenged the order of the CIT(A) confirming the aforesaid three additions before the Tribunal and the Tribunal vide order dated 9/2/1990 in I.T.A. No. 1266/Ahd/86 have decided the issues. Out of the addition of Rs. 72,868 an addition of Rs. 45,000 has been confirmed. The addition of Rs. 28,517 made under section 40A(3) has been deleted. Regarding the disallowance of Rs. 38,242 being the Incentive Bonus, the Tribunal has restored the matter to the CIT(A) to verify the register for payment of Incentive Bonus vide para 11 at page 39 of the Tribunal's order. 3. 1 On appeal, against the ITO's order under section 271(1)(c), the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus purchases to the tune of Rs. 72,868 and after considering various defects the Tribunal confirmed the addition of Rs. 45,000. The amount of Rs. 45,000 represented bogus purchases and accordingly penalty was leviable on this amount and to the extent of Rs. 45,000 the CIT(A) should have upheld the levy of penalty under section 271(1)(c). The learned DR further submitted that the CIT(A) has wrongly observed that the addition of Rs. 45,000 represented estimated addition because the addition was made for bogus purchases and the Tribunal taking into consideration the totality of the circumstances confirmed the addition of Rs. 45,000. The learned DR further submitted that the CIT(A) is not justified in deleting the penalty on technical ground i.e., after the Tribunal's order the company has suffered a loss, as even in loss cases penalty under section 271(1)(c) is leviable in view of the decisions of Tribunal in the cases of Basti Sugar Mills Co. Ltd. v. ITO [1987] 22 ITD 246 (Delhi) and Bhim Raj Anand Kumar v. ITO [1990] 33 ITD 508 (All.). In respect of levy of penalty on account of other two additions viz. under section 40A(3) and Incentive Bonus, the learned DR relied upon the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but that does not absolve the assessee of the charge of the concealment. The words used by the Tribunal are "considering the totality of the circumstances" which means that the bogus nature of the purchases has not been overlooked by the Tribunal as is evident from the following observations of the Tribunal, in para-7.5 at page 32 of its order: "In view of various discrepancies and mistakes pointed out by the ITO in the assessment order and in view of the fact that purchase invoices in respect of purchases made from the aforesaid six parties are admittedly bogus, and those parties are neither traceable nor identifiable, the ITO had rightly rejected the book results and in a case like this provisions of section 145(2) of Income-tax Act, 1961 are clearly applicable. The learned Advocate General also did not rightly contest the applicability of section 145(2)." From the above observations of the Tribunal it is noted that the genesis of the addition of Rs. 45,000 is rooted in the bogus purchases made by the assessee. It is not an addition simpliciter to the Trading A/c. but the addition has been made by the ITO and confirmed by the CIT(A) and partly confirmed by the Tribunal on sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e context. However, it is important to note that in common parlance for a loss case one generally describe as loss computed rather than loss assessed. It means that the words 'total income assessed' do not necessarily include a case of loss computed or assessment resulting in loss. Now, the point is that in this particular context that we are considering we must hold that these words 'total income assessed' would not take into their ambit a case which has resulted in computation of loss even as per the assessment order. The reasoning is that we are considering the statutory provisions for levy of penalty and it has been held repeatedly that penalty provisions should be construed rather strictly. Further, even in the penalty provisions Explanation 4 is a sort of deeming provision and such a provision has to be construed even more strictly. Even further, Explanation 4 seeks to prescribe what is the 'amount of tax sought to be evaded' which means that it seeks to put an artificial meaning on these words viz., 'the amount of tax sought to be evaded'. In common parlance amount of tax means amounts of tax and it cannot take into its ambit a case where no tax is leviable at all. This cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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