Centaur Mercantile P. Ltd. Vs ACIT (ITAT Mumbai)
It is undisputed that the assessee has booked bogus purchases thereby inflating work-in-progress. Hence, it is clear that the assessee was owner of undisclosed income during the year. It was because of the system of accounting followed by the assessee being percentage completion method, that there was no change in the figure of income offered in the year. However, the resultant impact of bogus purchases resulting in bogus inflation of work-in-progress was subsequently reversed and given effect in A.Y. 2011-12, in which year there was increase in corresponding income. Hence, we find that the assessee has been found to be in possession of undisclosed income during the year and on which penalty u/s. 271(1)(c) is exigible.
In this regard, we may refer to the provisions of section 5A of section 271(1)(c), makes it clear that as per clause (ii) of explanation 5A when during the course of search conducted on or after first day of June 2007, the assessee is found to be the owner of any income based on any entry in books of account which has not been disclosed for any previous year which has ended before the date of search, then he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income. We find that this provision is clearly applicable on the facts of this case. The search in this case has been conducted after the first day of June 2007. In the course of search, assessee has been found and has clearly accepted to have booked bogus purchases and, thus, admitted inflation of expense resulting in assessee being actually owner of the income to that extent. Even if the assessee subsequently discloses the income in any return of income furnished afterwards has been specified to be of no consequence. Hence subsequent disclosure or nondisclosure of income in any return of income furnished subsequently has been specifically referred to be of no consequence. Thus as per a specific provision of explanation 5A assessee has been found to be owner of undisclosed income by furnishing inaccurate particulars of income, based upon entry of bogus purchases in its books of account.
