2004 (9) TMI 48 - HC - Income Tax

Penalty - Whether Tribunal is right in law in upholding the findings of the Commissioner of Income-tax (Appeals) cancelling the penalty imposed under section 271(1)(c), on the ground that there was no conscious and deliberate concealment on the part of the assessee? - Revenue has not been able to controvert the factual position as noticed by the Tribunal. - It is clear that the Tribunal has accepted the explanation of the assessee that it was only because of bona fide mistake that the value of rejected goods were not shown in the closing stock as on March 31, 1979. The findings recorded by the Tribunal are essentially findings of fact which have not been shown to be erroneous or perverse. In view of these uncontroverted facts, the conclusion of the Tribunal has to be upheld

Summary

Issues:
- Interpretation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income based on a bona fide mistake in accounting.

Analysis:
The High Court judgment addressed the question of law referred by the Income-tax Appellate Tribunal regarding the imposition of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The case involved the assessment year 1979-80 where certain goods were rejected by a party and sent back to the assessee, but the value of these rejected goods was not included in the closing stock as required. The Assessing Officer initiated penalty proceedings for concealment of income due to this omission. The assessee explained that it was a bona fide mistake and offered to add the value of the rejected goods to its total income. The Appellate Assistant Commissioner accepted this explanation and deleted the penalty, which was further upheld by the Tribunal.

The Tribunal found that the rejected goods were not received by the assessee on the closing day of March 31, 1979, and the necessary entries were made in the closing stock in September 1979. The Tribunal observed that if there was a mala fide intention, the goods would not have been entered in the stock at all. It was noted that the mistake in the accounts was pointed out much later, and the assessee's intention was not mala fide but a clear case of bona fide mistake. The Tribunal emphasized that not every agreed addition leads to penalty imposition, especially if the mistake is due to inadvertence on the part of the assessee, citing legal precedent to support this stance.

The High Court concurred with the Tribunal's findings, stating that the explanation provided by the assessee regarding the omission in accounting was accepted as a bona fide mistake. The Court upheld the Tribunal's conclusion, emphasizing that the findings were factual and not shown to be erroneous. As a result, the High Court answered the question in favor of the assessee and against the Revenue, thereby affirming the deletion of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.