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2009 (12) TMI 663 - AT - Income Tax

Issues Involved:
The judgment involves penalties imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment years 2002-03 and 2003-04 based on the disallowance of bonus liability claimed by the assessee.

Assessment Year 2002-03:
The penalty imposed was Rs. 2,25,000, which was 100% of the tax sought to be evaded. The assessee had claimed a bonus liability in its accounts but failed to pay it as required by section 43B. The Assessing Officer concluded that this led to inaccurate particulars and concealment of income, justifying the penalty.

Assessment Year 2003-04:
A penalty of Rs. 2,77,600, also 100% of the tax sought to be evaded, was imposed for similar reasons as in the previous year. The Assessing Officer found the deduction of bonus liability to be unfounded, leading to inaccurate particulars and concealment of income.

CIT(A) Findings:
The CIT(A) upheld the penalties, noting the assessee's repeated wrongful deduction claims despite disallowances under section 43B. The CIT(A) highlighted the alleged mens rea in the assessee's conduct as a basis for confirming the penalties.

Appellate Tribunal's Decision:
The Appellate Tribunal considered the Supreme Court's ruling that wilful concealment is not necessary for penalty under section 271(1)(c). It emphasized the need for establishing inaccurate particulars or concealment. The Tribunal found that the assessee's accounting treatment of bonus liability was legitimate, and the mistake was limited to the computation of taxable income.

Accounting Treatment and Assessing Officer's Role:
The Tribunal emphasized the need for adjustments in light of section 43B requirements and the Assessing Officer's duty to scrutinize deductions claimed. It highlighted the importance of considering a block of assessment years to assess any alleged concealment accurately.

Conclusion:
Based on the facts and legal aspects, the Tribunal concluded that the penalties were unjustified. It ruled in favor of the assessee, stating that the circumstances did not warrant penalty imposition under section 271(1)(c) of the Act. The reliance on mens rea by the CIT(A) was deemed untenable in light of the Supreme Court's judgment. Consequently, the penalties were deleted, and the appeals by the assessee were allowed.

 

 

 

 

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