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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
These appeals by the assessee are arising out of the orders of the Commissioner of Income-Tax (Appeals)-20, Chennai in & 180/CIT(A)/2023-24 both dated 31.10.2023. The assessments were framed by the Deputy Commissioner of Income Tax, Central Circle-2, Coimbatore for the assessment years 2014-15
- 2 - & 1600/Chny/2023 & 2015-16 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide orders dated 19.12.2016 & 27.10.2017 respectively. The impugned penalties u/s.271(1)(c) of the Act were levied by the Deputy Commissioner of Income Tax, Central Circle-2, Coimbatore for the assessment years 2014-15 & 2015-16 vide orders dated 16.02.2022 & 15.02.2022 respectively.
The only common issue in these two appeals of assessee is as regards to the orders of the CIT(A) confirming the action of the AO in levying penalties u/s.271(1)(c) of the Act for the assessment year 2014-15 at Rs.7,59,677/- and for assessment year 2015-16 at Rs.7,11,900/- for concealment of particulars of income. For this, assessee has raised identically worded grounds and facts and circumstances are also identical and hence, will take the facts from assessment year 2014-15 in and will decide the issue. The grounds raised by the assessee are factual, argumentative and exhaustive and hence, need not be reproduced.
Brief facts are that the assessee is engaged in the business of feed production for animals. During the course of survey, the Department noticed that the assessee was booking expenses on account of purchase of maize from local people and these purchases
- 3 - & 1600/Chny/2023 are supported with self-made vouchers and payment made in cash. The assessee filed its return of income for the relevant assessment year 2014-15 on 15.09.2014 and assessment was completed u/s.143(3) dated 19.12.2016 by making addition of Rs.5,00,000/- reducing the loss at Rs.1,39,43,160/-. Subsequently, survey u/s.133A of the Act was carried out on the business premises of the assessee on 18.01.2018 and consequent to the survey, the assessee was noticed to have been indulged in bogus purchases or inflating its purchases. Consequently, assessment was reopened u/s.147 r.w.s 148 of the Act dated 05.04.2018 and reassessment was completed on confronting the discrepancies in regard to bogus purchases not entered in the stock register and partner stating that the purchases were made within the factory premises itself and the same remained to be recorded in the stock inward register. The partner of the assessee, Shri Ganpati Chettiar Sundaram vide statement dated 18.12.2018 voluntarily offered to declare a sum of Rs.22,35,000/- as additional income on account of bought note purchases being inflated purchases or bogus purchases not supported by vouchers. The assessment was completed u/s.143 r.w.s. 147 of the Act after arriving at a net loss of Rs.1,22,08,160/-. As the assessee voluntarily included this sum of Rs.22,35,000/- as additional income,
- 4 - & 1600/Chny/2023 penalty u/s.271(1)(c) of the Act for concealing particulars of income was initiated.
The AO during the penalty proceedings issued show-cause notice as to why the order imposing penalty should not be made u/s.271(1)(c) of the Act. The assessee vide letter dated 25.06.2021 submitted that the assessment was completed accepting the returned income and since the assessment was completed as per returned income without any addition there is no question of any concealment of income. But the AO simpliciter on the basis of accepting the income of Rs.22,35,000/- being alleged bogus purchases or inflated purchases not supported by proper vouchers treated the same as concealed income. For this, the AO observed in para 5.0 as under:- “5.0 I have perused the submission made by the assessee. The contention of assessee cannot be accepted as the assessment U/s 143(3) r.w.s 147 was completed on 26.12.2019 accepting the return of income filed by the assessee in response to the notice issued u/s 148 where in the assessee has themselves declared a loss of Rs.122,08,160/- reducing the loss declared of Rs.1,44,43,1601/- u/s. 139(1) by admitting the income offered of Rs.22,35,000/- during the course of survey. The assessee revised its return of income only after the discrepancies find out during the course of survey and the reason provided by the AO for re-opening of assessment of u/s 147 of the Act. Had there not been a survey conducted and the discrepancies found out during the course of survey, the assessee would not have been offered income of Rs.22,35,000/- as explained supra above.”
- 5 - & 1600/Chny/2023 Finally, the AO held in view of the above, the assessee has concealed its income and this is a fit case for imposition of penalty u/s.271(1)(c) of the Act for concealment of income. Aggrieved, assessee preferred appeal before CIT(A).
4. The CIT(A) confirmed the penalty levied by invoking Explanation 4 to section 271(1)(c) of the Act on ‘amount of tax on income sought to be evaded’. He noted that the assessee has nowhere disputed the bogus purchases and unearthed all bogus purchases during survey u/s.133A of the Act. According to him, income admitted by assessee in the return of income filed in response to notice u/s.148 of the Act for the year under consideration cannot be treated as voluntary and if assessee wanted to voluntarily disclose income, it would have disclosed the income on account of bogus purchases to tax in the original return itself. Therefore, the CIT(A) relying on various case laws recorded her finding in para 7.21 & 7.22 and dismissed the appeal of assessee by observing as under:- “7.21 Decision of Hon'ble Apex court has been followed in several other cases. Another Contention of appellant that since AO has mentioned in the assessment order that Nothing adverse has been found', there is no concealment has also been examined in the light of assessment order. From the assessment order, it clear that AO has called for some details vide notice
- 6 - & 1600/Chny/2023 dated 09-12-2019 in response to which appellant furnished reply on 13-12- 2019. The AO perused the reply of appellant and has mentioned that ‘Nothing adverse has been found' in reply furnished by appellant. Therefore, observation made by AO in some other context cannot be construed as certification by AO that there is no concealment found for the year, especially when AO has recorded satisfaction for initiation of penalty proceedings at the end of assessment order as under.
It is being brought on record that the assessee revised its return of income only after the discrepancies as mentioned in the reasons to re-open were brought to light during the course of survey. As such, the penalty u/s 271(1)(c) of the act is being initiate d for the concealment of income to that effect.
7.22 In view of detailed discussion made in preceding paragraphs, I don't find merit in the claim of Appellant that penalty u/s 271(1)(c) is not attracted in its case since income returned in response to Notice u/s 148 has been accepted by the AO and Explanation 4 holds good only when there is difference between income assessed and income returned. Therefore, following as per Explanation (4)(b), ÁO has arrived at 'Amount of Tax sought to be evaded' by calculating tax on unaccounted purchases amount Rs.22,35,000/-, which I consider is in order. Explanation (4)(b) nowhere refers to returned income and assessed income as claimed by appellant. I am of the considered view that the AO has rightly levied penalty u/s 271(1)(c) Rs 7,59,677/-. Consequently, Grounds of appeal of appellant are dismissed.”
Aggrieved, assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. The facts of the case are that the assessee is a partnership firm, e-filed its return of income for the assessment year 2014-15 on 15.09.2014 admitting loss of Rs.1,44,43,160/-. Initially, assessment was completed u/s.143(3)
- 7 - & 1600/Chny/2023 by making addition of Rs.5,00,000/- reducing the loss at Rs.1,39,43,160/-. Subsequently, a survey u/s.133A of the Act was carried out in assessee’s premises on 18.01.2018. During the course of survey, it was noticed that assessee was booking expenses on account of purchase of maize from local people. These purchases were supported with self-made vouchers and payments were made in cash. It was noticed that these purchases were not entered in the stock inward register and the amount of such purchase for the relevant assessment year was Rs.1,11,79,870/-. On confronting the discrepancy of not finding the bought note purchase entries in the stock inward register, the partner, Shri Ganpati Chettiar Sundaram stated that since the purchases were made within the factory premises itself, the same were not recorded in the stock inward register. The partner of the assessee, Shri Ganpati Chettiar Sundaram vide sworn statement dated 18.12.2018 voluntarily offered to declare a sum of Rs.22,35,000/- as additional income being 20% of the bought note purchase not supported by vouchers and not entered in stock register.
5.1 We noted that from the above, that the assessee has admitted an income of bogus purchases or inflated alleged purchases or purchases which are not supported by proper vouchers and not - 8 - & 1600/Chny/2023 entered in stock register amounting to Rs.22,35,000/-. Admittedly, these purchases were bogus purchases and were declared in return filed in response to notice u/s.148 of the Act, consequent to survey u/s.133A of the Act, carried out in the business premises of the assessee on 18.01.2018. Admittedly, the assessee’s original return of income was filed on 15.09.2014 in which no income on account of inflated purchases was disclosed. Can such amount be treated as concealment of income? The ld.counsel for the assessee before us relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal reported in 251 ITR 9, wherein exactly on identical facts, as in the given facts of the case, where assessee filed original return of income and when a search action u/s.132 of the Act was initiated, notice u/s.148 of the Act was served and he filed return in response to notice u/s.148 of the Act disclosing higher income, the Hon’ble Supreme Court held that the Tribunal was justified in cancelling the penalty because of the fact that declaration of income made by assessee in his revised return and his explanation that he has done so to buy peace with the Department and to come out of tax litigation should be treated as bonafide explanation in the facts and circumstances of the case.
- 9 - & 1600/Chny/2023 5.2 Here also, in the present case before us, the assessee is unable to prove a claim because the vouchers of purchases were self-made vouchers and this fact has been recorded by AO in para 2 of the penalty order, which reads as under:- “2. During the course of survey, it was noticed that assessee was booking expenses on account of purchase of maize from local people (bought note purchase). These purchases are supported with self made vouchers and payments are made in cash. It was noticed that these purchases were not entered in the stock inward register. The amount of such purchase for the year under consideration is Rs.1,11,79,870/-.
We noted that once these purchases are supported by self-made vouchers and the same are treated as bogus as held by the AO, how the same is concealment of particulars of income leading to concealment of income, the decision of Hon’ble Supreme Court in the case of Suresh Chandra Mittal, supra, squarely applies to the facts of the case. Hence, respectfully following the decision of Hon’ble Supreme Court in the case of Suresh Chandra Mittal, supra, we delete the penalty and allow the appeal of assessee.
Coming to 2015-16, the facts and circumstances are exactly identical to assessment year 2014-15 in dealt above and facts being identical, we delete the penalty and allow the appeal of assessee.
- 10 - & 1600/Chny/2023
In the result, the appeals filed by the assessee in & 1600/CHNY/2023 are allowed.
Order pronounced in the open court on 30th April, 2024 at Chennai.