Anil K. Shah (HUF) Vs ITO (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, deleted a penalty of Rs. 6,96,096/- levied under Section 271(1)(c) of the Income Tax Act, 1961, against Anil K. Shah (HUF) for the Assessment Year (AY) 2009-10. While the Tribunal acknowledged that the underlying quantum appeal had confirmed that the purchase transactions were bogus, the penalty was struck down because the Assessing Officer (AO) had levied it on the charge of “concealing the particulars of income,” instead of the correct charge of “furnishing inaccurate particulars of income.”
The case stemmed from a reassessment under Section 147 based on information regarding accommodation bills used to inflate purchases. The AO initially made a 100% addition of Rs. 17,19,214/- for bogus purchases from two traders. In the quantum appeal, the ITAT’s Co-ordinate Bench, while confirming that the purchases were indeed bogus due to the assessee’s failure to produce delivery challans, stock registers, or transport bills, reduced the addition to 12.5% of the bogus amount. This restriction was made on the principle that since the assessee’s corresponding sales were not rejected, there must have been some genuine material purchased, and the addition should be restricted to the profit element embedded in the bogus purchases and taxes evaded. This action followed the principle laid down by the Gujarat High Court in CIT vs. Simit P. Seth [356 ITR 451 (Guj)].
