Om Prakash, CJ : The Tribunal referred the following questions relating to the assessment year 1987-88 under s. 256(1) of the Income Tax Act, 1961 for the opinion of this Court:
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the levy of penalty under s. 271(1)(c) of the Income Tax Act?
2. Whether, there were materials for the Tribunal to come to the conclusion that there was concealment of income to the extent of Rs. 1,61,459 by the applicant?"
2. The facts, as gleaned from the penalty order, are thus: The assessee filed return of income on 30-10-1987 declaring a total income of Rs. 2,10,460. Thereafter, a revised return was filed on 23-3-1988, declaring total income at Rs. 3,76,920. Again a revised return was filed on 13-6-1988 declaring a total income of Rs. 4,21,920 on which assessment was completed on 1-3-1989. A penalty notice was issued simultaneously calling upon the assessee to show cause why penalty under s. 271(1)(c) of the Income Tax Act should not be levied for concealment of particulars of income. Pursuant to the said show-cause notice, a reply was filed by the assessee. The assessing officer discovered that purchases purporting to have been made from Vijaya Metal Industries, Padivattom, Cochin, by the assessee aggregating to Rs. 1,61,459, were bogus. The explanation of the assessee was that purchases had been made through brokers and there was no direct link between the assessee and the suppliers and, therefore, the suppliers could not be identified.
2. The facts, as gleaned from the penalty order, are thus: The assessee filed return of income on 30-10-1987 declaring a total income of Rs. 2,10,460. Thereafter, a revised return was filed on 23-3-1988, declaring total income at Rs. 3,76,920. Again a revised return was filed on 13-6-1988 declaring a total income of Rs. 4,21,920 on which assessment was completed on 1-3-1989. A penalty notice was issued simultaneously calling upon the assessee to show cause why penalty under s. 271(1)(c) of the Income Tax Act should not be levied for concealment of particulars of income. Pursuant to the said show-cause notice, a reply was filed by the assessee. The assessing officer discovered that purchases purporting to have been made from Vijaya Metal Industries, Padivattom, Cochin, by the assessee aggregating to Rs. 1,61,459, were bogus. The explanation of the assessee was that purchases had been made through brokers and there was no direct link between the assessee and the suppliers and, therefore, the suppliers could not be identified.
3. The assessing officer, however, held that despite sufficient opportunity being given to the assessee to produce purchase and sale registers and the stock register coupled with the stock inventories for the relevant period, the assessee could produce only the stock inventory. Neither were purchase and sale registers nor was the stock register showing the day-to-day stock position produced. The argument of the assessee was that such registers were not maintained. Even the name and address of the brokers through whom these purchases were said to have been made, were not furnished. The assessing officer in the penalty order also observed as under:
3. The assessing officer, however, held that despite sufficient opportunity being given to the assessee to produce purchase and sale registers and the stock register coupled with the stock inventories for the relevant period, the assessee could produce only the stock inventory. Neither were purchase and sale registers nor was the stock register showing the day-to-day stock position produced. The argument of the assessee was that such registers were not maintained. Even the name and address of the brokers through whom these purchases were said to have been made, were not furnished. The assessing officer in the penalty order also observed as under:
"During the discussion the assessee's representative argued that even if penalty is to be levied in this case, the concealed amount could be taken at the most at Rs. 1,61,459..."
4. The assessing officer did not accept the contention of the assessee that the purchases were genuine. He found that there was a search operation on the assessee's premises on 22-10-1986, when it was discovered that the assessee had understated the stock to the extent of Rs. 3.5 lakhs. The assessing officer further found that in the successive revised returns the additional income was declared by the assessee having known that the department had discovered the bogus purchases. This is how the assessing officer imposed penalty at Rs. 1,05,730 under s. 271(1)(c) of the Income Tax Act. In appeal before the appellate authority and before the Tribunal, the assessee failed.
4. The assessing officer did not accept the contention of the assessee that the purchases were genuine. He found that there was a search operation on the assessee's premises on 22-10-1986, when it was discovered that the assessee had understated the stock to the extent of Rs. 3.5 lakhs. The assessing officer further found that in the successive revised returns the additional income was declared by the assessee having known that the department had discovered the bogus purchases. This is how the assessing officer imposed penalty at Rs. 1,05,730 under s. 271(1)(c) of the Income Tax Act. In appeal before the appellate authority and before the Tribunal, the assessee failed.
5. From the foregoing facts, it is amply clear that the assessee failed to furnish the particulars of brokers through whom the purchases were claimed to have been made. The assessee also failed to produce the purchase and sale registers and the stock register.
5. From the foregoing facts, it is amply clear that the assessee failed to furnish the particulars of brokers through whom the purchases were claimed to have been made. The assessee also failed to produce the purchase and sale registers and the stock register.
6. On these facts, we are of the considered view that the assessing officer was right in holding that the purchases to the extent of Rs. 1,61,459 were bogus. Before the assessing officer, the representative of the assessee himself stated that if at all concealment was there with regard to bogus purchases, that could be taken at Rs. 1,61,459. On these facts nothing but a clear inference of concealment could be drawn by the authority.
6. On these facts, we are of the considered view that the assessing officer was right in holding that the purchases to the extent of Rs. 1,61,459 were bogus. Before the assessing officer, the representative of the assessee himself stated that if at all concealment was there with regard to bogus purchases, that could be taken at Rs. 1,61,459. On these facts nothing but a clear inference of concealment could be drawn by the authority.
In the result, we answer both the questions in the affirmative that is in favour of the Revenue and against the assessee.
OPEN