SHRI NITESH G.THAKKAR,,PATAN vs. THE INCOME TAX OFFICER, WARD-1,, PATAN

The relevant facts concerning the case in brief are that the assessee is proprietor of Deep Cotton Industries doing business of cotton process. A survey action under section 133A of the Act was carried out at the business premises of the assessee on 1.9.2008 in conjunction with other search and

Consequent upon the quantum proceedings, the AO also invoked provisions of section 271(1)(c) of the Act and imposed penalty on aforesaid concealed income of Rs.52,37,420/- and quantified penalty at Rs.17,69,186/-.

Aggrieved against aforesaid action of the AO towards imposition of penalty, the assessee preferred appeal before the CIT(A) without any success.

Further aggrieved, assessee has knocked door of the Tribunal for relief from the aforesaid imposition of penalty.

The ld.AR for the assessee vehemently contended that penalty has been erroneously imposed and confirmed in the quantum proceedings on estimated additions towards alleged bogus purchases. The ld.AR referred to the decision of the Coordinate Bench in quantum proceedings and submitted that the Coordinate Bench has clearly observed in para 11 of its order that while purchase bills from “VT” may be adjusted bills, but the purchases itself are not bogus per se. The ld.AR submitted that it is nobody’s case that purchases have not taken place at all. The finding in the quantum proceedings limited to the extent that purchases have not happened from “VT” as recorded in the books of accounts. As a corollary, it was inferred that actual purchases have been possibly made from unknown registered dealer. The assessee has been saddled with additional tax liability based on guess-work that the purchases made have not been correctly reported. The ld.AR thus submitted that where it has been found as a matter of fact that purchases did eventually took place, notwithstanding from different parties, penalty on such hypothetical determination of estimated income is not called for in view of several decisions of this Tribunal. The ld.AR also relied upon the decision of Hon’ble Gujarat High Court in the case of Vijay Proteins Ltd. Vs. CIT, Tax Appeal No.243 of 2002 order dated 9.12.2014 and CIT Vs.Valmiki Patel, 282

The ld.DR on the other hand relied upon the orders of the authorities below and submitted that bogus purchases were found as a matter of fact after meticulous inquiry. It was submitted that record make it apparent that the assessee had subverted facts and recorded bogus purchases in its books of accounts, which fact has been endorsed by the ITAT in the appellate proceedings. Addition on this count was ultimately confirmed by the Tribunal albeit partly on the ground that purchases probably took place in view of corresponding sales. The ld.DR submitted that in the wake of speaking facts narrating deception and design of the assessee after elaborate inquiry, there can be no reasons to take a different view in the matter of penalty. The ld.DR submitted that action of the AO and the CIT(A) towards imposition of penalty with reference to the decision of the Hon’ble Gujarat High Court in the case of A.M. Shah & Co. Vs. CIT, 238 ITR 415 and exhorted that penalty is leviable where discrepancy of such nature has been detected giving rise to the concealment of income, and in the light of falsity discovered in the course of survey and post survey inquiries. The ld.DR finally concluded that estimation have been made only to determine quantification of concealment. The fact of concealment is not in question at all in view of the decision of the Coordinate Bench in the quantum proceedings.

We have carefully considered rival submissions and perused the orders of the authorities below and case laws cited. The question for adjudication before us is on maintainability of imposition of penalty by the Revenue under section 271(1)(c) of the Act having regard to the facts and circumstances of the case. As noted in the preceding paragraphs, we observe that facts in the present case are extremely peculiar. In the instant case, the Revenue has established beyond any reasonable doubt that the assessee was indulged in booking bogus bills of unworthy supplies to inflate expenses. Tell-tale evidence of intermediary i.e. Shri Madanlal L. Shah and power of attorney holder of the assessee and confirmation thereof in cross-examination of intermediaries coupled with lack of proof towards delivery of purchases and clouded and suspicious bank transactions recorded to this effect leaves us in any manner of doubt that the assessee had deliberately and willfully subverted real source and character of the transactions. While doing so, the assessee also prevented Revenue from knowing real source of supply and whereabouts of the supplier of the alleged goods purchased, if any. In the circumstances, appellate authorities were left with no option but to estimate a plausible over- statement of expenditure on purchases, and thereby understatement of profits. Thus, in these gross facts as recorded in the quantum proceedings, it is not a matter for consideration as to whether there was any concealment resorted by the assessee or not. Fact of under-statement of income is discernible. Only matter for consideration is extent of quantification of understatement of income. ITAT as a final fact finding authority has lent objectivity to such estimation. Thus, quarrel about quantum of estimated undisclosed income also does not survive any more. In these circumstances, we do not see any rational ground for granting latitude to the assessee in the matter of relief pleaded. The assessee has referred to certain case laws as noted above where a view has been taken that estimate addition does not necessarily call for

In the result, appeal of the assessee is dismissed. Order pronounced in the Court on 10th May, 2018 at Ahmedabad.