Itr/8/1999 Of M/S.kalpaka Bazar v. The Commr Of Income Tax,Cochin

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE HARUN-UL-RASHID WEDNESDAY, THE 26TH NOVEMBER 2008 / 5TH AGRAHAYANA 1930 ITR.No. 8 of 1999() ------------------- AGAINST THE ORDER IN RA.84/COCH//1995 IN ITA 263/C/COCH/90 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT(S): -------------- M/S.KALPAKA BAZAR,TOWN HALL ROAD, CALICUT. BY ADV. SRI.C.KOCHUNNY NAIR SRI.DALE P.KURIEN RESPONDENT(S): --------------- THE COMMISSIONER OF INCOME-TAX,COCHIN. ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 26/11/2008, THE COURT ON 26/11/2008 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &HARUN-UL-RASHID, JJ. .................................................................... I.T. Reference No.8 of 1999 .................................................................... Dated this the 26th day of November, 2008. JUDGMENT Ramachandran Nair, J. In the reference at the instance of the assessee, the Tribunal has referred the following question as arising from their order disposing ofthe penalty appeal for 1984-85. "Whether the Tribunal was right in confirming thepenalty u/s 271(1)(c) in respect of the inflation of purchase tothe tune of Rs.1,11,193/- where it could be found that theground raised by the department that the inflation in purchaseto the tune of Rs.1,11,193/- was actually detected only whenthe assessment was subjected to audit u/s.142(2A) as not avalid and correct ground?" 2. For the assessment year 1984-85 assessee filed return disclosing income of Rs.1,54,713/-. However, the Income Tax Officercompleted assessment on a total income of Rs.14,41,640/- whichincluded addition towards purchase inflation for Rs.1,11,193/- andgross profit addition of Rs.11,21,066/-. In fact, search was carried outin the premises of the assessee and books of accounts and otherdocuments were seized. Statutory audit was done under Section 142 (2A) of the Income Tax Act. The Auditor brought out bogus purchasesaccounted by the assessee to the extent of Rs.1,11,193/- whichrepresents proforma invoices not representing any actual purchases.Penalty is levied based on inflation of purchase value and on account ofgross profit addition. However, in successive appeals, penaltyattributable to gross profit addition was deleted which is final.However, Tribunal sustained penalty pertaining to inflation ofpurchases amounting to Rs.1,11,193/-. 3. Admittedly the disputed amount represents proforma invoiceswhich do not represent actual purchases and so much so, the disputedexpenditure is bogus purchase accounted by the assessee. Accountingof bogus purchase expenditure is nothing but concealment andtherefore, penalty was rightly levied which got confirmed in appeal.In view of the clearcut finding of fact against the assessee, we answerthe question referred against the assessee and in favour of thedepartment. Reference case is disposed of as above. A copy of this judgment under the seal of the High Court andsignature of the Registrar shall be forwarded to the Income TaxAppellate Tribunal, Cochin Bench, Cochin. C.N.RAMACHANDRAN NAIRJudge pms HARUN-UL-RASHIDJudge