|CORAM:||Manoj Kumar Aggarwal (AM), Saktijit Dey (JM)|
|SECTION(S):||271(1)(c), 274, 292BB, 69C|
|CATCH WORDS:||Bogus purchases, Bogus Sales, concelment Penalty, furnishing inaccurate particulars of income|
|COUNSEL:||Dr. K. Shivram, Neelam Jadhav|
|DATE:||May 2, 2017 (Date of pronouncement)|
|DATE:||May 9, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 271(1)(c): Bogus purchases cannot be assessed as 'unexplained expenditure' u/s 69C if the transactions are duly disclosed and payments are through banks. The fact that the sellers are not traceable and the assessee surrendered the bogus purchases does not justify levy of penalty. Mere non-striking of the options in the s. 274 notice does not render the penalty proceedings void if the assessment order shows due application of mind.|
(i) A perusal of the quantum order reveals that the penalty was initiated for furnishing of inaccurate particulars and finally the same was levied on the same ground. The assessee was issued two show cause notices- one in the standard printed form u/s 274 dated 04/03/2013 and another dated 27/08/2013 by way of letter. In the first notice, the relevant clause has not been ticked off and the second notice is simply a show cause notice. However, in the quantum order the AO, after due deliberations, clearly initiated the penalty proceedings for furnishing of inaccurate particulars which shows due application of mind qua penalty proceedings. The penalty was finally levied on the same ground as well. Therefore, mere marking of relevant clause, in our opinion, on the facts of the case, has not caused any prejudice to the assessee particularly when the assessee voluntarily offered certain additions in the quantum proceedings with a specific request to AO for not initiating the penalty against the same. The assessee very well knew the charges / grounds for which he was being penalized and he actively contested the penalty before the Ld. AO. At this juncture, we find that the provisions of Section 292B comes to the rescue of the revenue which cures minor defect in the various notices issued provided such notice in substance and effect was in conformity with the intent and purpose of the act. On overall facts and circumstances, we find that such condition was fulfilled in the instant case. We find that the revenue’s Special Leave Petition [SLP] dismissed by the Apex court in CIT Vs. SSA’S Emerald Meadows [73 taxmann.com 248] confirmed the decision of Hon’ble High court, which in turn, relied upon the judgment rendered in CIT Vs. Manjunatha Cotton & Ginning Factory [359 ITR 565]. The decision rendered by Hon’ble Bombay High court in CIT Vs. Samson Perinchery [ITA No. 1154 of 2014 05/01/2017] also placed the reliance on this judgment. After perusing the ratio of the judgment rendered in CIT Vs. Manjunatha Cotton & Ginning Factory [supra], we find that the assessee’s appeal was allowed by Hon’ble High court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore, we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld. AR in the notice and therefore, the legal grounds raised are rejected.
(ii) On merits, Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Nevertheless, the assessee was in possession of vital evidences in his possession to prima facie substantiate his purchases to some extent particularly when the payments were though banking channels. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case.