2013 (12) TMI 1602 - AT - Income Tax

Summary

Issues Involved:
1. Whether the Commissioner of Income Tax(A) erred in upholding the penalty levied u/s 271(1)(d) of the Income Tax Act, 1961.
2. Whether the appellant's suo moto offer of disallowed expenses affects the imposition of penalty.
3. Whether the penalty was justified given the circumstances of the case.

Summary:

Issue 1: Penalty u/s 271(1)(d)
The assessee appealed against the order of the Commissioner of Income Tax(A) upholding the penalty levied by the Assessing Officer (AO) u/s 271(1)(d) of the Income Tax Act, 1961. The AO had observed that an amount of Rs. 11,55,634/- on account of conveyance was not included in the value of fringe benefit, leading to a disallowance of 20% of these expenses. The AO imposed the penalty citing judicial precedents, including Commissioner of Income Tax vs Gurbachan Lal and UOI vs Dharmendra Textile Processors. The Commissioner of Income Tax(A) upheld the penalty, stating that the appellant had furnished inaccurate particulars leading to a false claim.

Issue 2: Suo Moto Offer of Disallowed Expenses
The assessee contended that the disallowance was suo moto offered during the course of hearing and not due to any concealment or inaccurate particulars detected by the AO. The assessee argued that the mistake was a bona fide error in calculating the value for FBT and not a deliberate act of concealment. The Tribunal noted that the assessee had declared a significant amount of Rs. 2.54 crore as the value of fringe benefit and the impugned amount was relatively meager. The Tribunal referenced the ITAT Delhi judgment in Mr. Saket Agarwal vs ITO, which held that voluntary surrender to avoid litigation does not automatically justify penalty imposition.

Issue 3: Justification of Penalty
The Tribunal considered the rival arguments and legal precedents. The Tribunal observed that the assessee's explanation was not disproved and there was no evidence of deliberate concealment. The Tribunal highlighted that the penalty u/s 271(1)(d) can only be imposed if the explanation is found to be false or if the assessee fails to substantiate the explanation. The Tribunal found that the authorities below did not properly adjudicate the explanation provided by the assessee. The Tribunal concluded that the explanation offered by the assessee was acceptable and the penalty was not imposable. The Tribunal canceled the penalty orders, allowing the appeal of the assessee.

Conclusion:
The appeal of the assessee was allowed, and the penalty u/s 271(1)(d) was canceled. The Tribunal emphasized that the voluntary surrender of the impugned amount and the bona fide nature of the mistake did not justify the imposition of the penalty.