Law:

Section:

Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1984-85 - For relevant assessment year assessee filed return disclosing certain income - Subsequently, a search was carried out in premises of assessee and books of account and other documents were seized - Statutory audit was done under section 142(2A) wherein auditor brought out bogus purchases accounted by assessee - Assessing Officer levied penalty based on inflation of purchase value - On appeal, Tribunal sustained penalty - Whether accounting of bogus purchase expenditure was nothing but concealment and, therefore, penalty was rightly levied - Held, yes C. Kochunny Nair and Dale P. Kurien for the Applicant. P.K.R. Menon and George K. George for the Respondent. ORDER C.N. Ramachandran Nair, J. In the reference at the instance of the assessee, the Tribunal has referred the following questions as arising from their order disposing of the penalty appeal for 1984-85:- "Whether the Tribunal was right in confirming the penalty under section 271(1)(c) in respect of the inflation of purchase to the tune of Rs. 1,11,193 was actually detected only when the assessment was subjected to audit under section 142(2A) as not a valid and correct ground?" 2. For the assessment year 1984-85 assessee filed return disclosing income of Rs. 1,54,713. However, the Income-tax Officer completed assessment on a total income of Rs. 14,41,640 which included addition towards purchase inflation for Rs. 1,11,193 and gross profit addition of Rs. 11,21,066. In fact, search was carried out in the…

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