2006 (8) TMI 442 - AT - Income Tax

Penalty imposed u/s 271(1)(c) - For concealment and inaccurate particulars of income - HELD THAT - An assessment u/s 143(3) presupposes an assessment after enquiries. It is quite natural that there will be a number of adjustments either by way of additions or by way of disallowances. In certain cases, the assessee himself may come forward and offer some additional amount for assessment on the basis of the impression gathered at the time of assessment proceedings. These are all matters of common knowledge. These types of additions and disallowances will not make out a case of concealment or furnishing of inaccurate particulars. If the view of the Revenue is to be accepted, every addition or disallowance made in the course of an assessment would invariably result in imposing penalty which is nowhere implied as the intention of law. The other items of additions made by the Assessing Officer are by way of disallowance of various expenditures. Here also the assessee has furnished the details. All the expenses have been accounted. Certain disallowance were made. The assessee might not have agitated those additions. But that does not mean that the disallowances reflected concealment or furnishing of inaccurate particulars. Thus, it is our considered view that the Assessing Officer has overstated the gravity of the case and made out a case of penalty without any basis. The CIT(A) has appreciated the facts of the case in a rightful manner and has deleted the penalty which should have been rightfully deleted. The order of the CIT(A) is to be upheld. In result, this appeal filed by the Revenue is dismissed devoid of merit.

Summary

Issues:
Penalty appeal under section 271(1)(c) for inaccurate particulars of income.

Analysis:
The appellant, a celebrated film star, declared income for the assessment year at Rs. 19,33,730, but the assessment completed under section 143(3) showed a total income of Rs. 71,04,790 with various additions. The Assessing Officer initiated penalty proceedings under section 271(1)(c) alleging inaccurate particulars of income. The appellant explained that certain receipts were treated as advances as film shooting had not commenced, and later decided to treat them as income following industry practice. The Assessing Officer imposed a penalty of Rs. 13 lakhs, considering the additions as concealment. In the first appeal, the CIT(A) found no inaccurate particulars regarding the advances and disallowances, deleting the penalty.

The main controversy centered around the treatment of advances in the appellant's accounts. The appellant, following the mercantile system of accounting, treated certain receipts as advances due to unfulfilled contractual obligations. The Assessing Officer accepted the details of receipts but disagreed on whether all receipts should be treated as income for the year. The appellant's change in treating advances as income was based on industry practice, not concealment or inaccurate particulars. The Tribunal upheld the CIT(A)'s decision, emphasizing that mere additions or disallowances in assessments do not automatically imply concealment or inaccurate particulars, especially when the appellant cooperated and made adjustments based on industry norms.

In conclusion, the Tribunal dismissed the Revenue's appeal, noting that the Assessing Officer overstated the case for penalty without a valid basis. The CIT(A)'s decision to delete the penalty was upheld, emphasizing that the appellant's actions did not amount to concealment or furnishing inaccurate particulars. The appeal was deemed meritless and dismissed.