The Ahmedabadbench of Income Tax Appellate Tribunal has upholds Income Tax Penalty forset off of business loss by showing bogus transactions.
The appellant, Gujarat Smelting & Refining Co. Ltd., is engaged in the activity of manufacturing of aluminium alloys casting. During the course of assessment, the assessee failed to justify the business loss shown by it based on the documentary and other tangible materials and hence AOrejected the books of account and denied the business loss of Rs. 72,63,457.00 which was set off against the short-term capital gain declared under section 50 of the Act.
The AO also imposed penaltyof Rs. 22,44,408 being hundred percent of the amount of tax sought to be evaded u/s 271 forfurnishing inaccurate particulars of income by claiming the bogus loss in order to set off against the short-term capital gain.The CIT (A) confirmed the order of AO, hence assessee filed appeal before ITAT.
The counsel for the appellant submitted that penalty cannot be imposed in the event books of accounts are rejected under the provisions of section 145(3) of the Act and the profit is determined on estimated basis. The appellant counsel further submitted thatthe assessee has voluntarily admitted for the disallowance of business loss shown by it. Hence, there cannot be any penalty under the provisions of section 271(1)(c) of the Act.
The Tribunal observed that the assessee has shown sales, purchases and other transaction in the income tax return whereas the assessee in the returns filed under VAT and excise has declared nil turnover. Hence, there remains no ambiguity to the fact that the assessee has shown bogus transactions of the business by generating the loss therein in order to set offs such loss against the taxable income.
The Tribunal further observed that the primary onus lies upon the assessee to furnish the basic documentary evidence in support of the particulars shown by it in the income tax return but the assessee fails to do so. Accordingly, the provisions of section 145(3) of the Act were invoked after rejecting the loss shown by the assessee in entirety. The assessee cannot be absolved from the penalty merely on the reasoning that it has agreed for the addition or disallowance during the quantum proceedings.
The Coram of Mr. Waseem Ahmed, Accountant Member and Mr. Siddhartha Nautiyal, Judicial Member has held that “we are of the view that the assessee cannot escape from the penalty in the given facts and circumstances. Accordingly, we do not find any infirmity in the order of the CIT-A and therefore we decline to interfere in his order. Hence, the ground of appeal of the assessee is hereby dismissed”.
Mr. Vinit Moondra, CA and Mr. Sudhendu Das appeared on behalf of the assessee and revenue respectively.
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