2015 (2) TMI 1247 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance of prior period expenses - Held that - There were 8 units which were later merged and the assessee company was incorporated. The expenses of 1, 69, 71, 833/- pertained to an earlier period but were claimed in the current year. Therefore there was no attempt to conceal income. The assessee claimed the expenses in the current year under a bonafide belief that the expenses could be claimed as they were genuine business expenses. Mensrea was a essential requirement of penalty u/s 271(1)(c). See CIT vs. Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT We are of the view that the assessee has not deliberately furnished inaccurate particulars with a view to concealment of income. We further find that the explanation of the assessee is bonafide. In the background of the aforesaid discussions and precedents we find that Ld. CIT(A) has rightly observed that the assessee would not be liable for levey of penalty and he deleted the penalty - Decided against revenue.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for disallowance of prior period expenses.

Analysis:
The case involved an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals-XI) New Delhi regarding the deletion of a penalty of Rs. 57,12,718 imposed under section 271(1)(c) of the Income Tax Act due to the disallowance of prior period expenses. The assessee failed to appear during the hearing, leading to an ex-parte decision. The facts revealed that the assessee had debited prior period expenses to the profit and loss account, which the AO considered as an attempt to evade taxes willfully. The AO imposed the penalty, which was partly allowed by the Ld. First Appellate Authority.

The Ld. CIT(A) noted that the prior period expenses were genuine and not for the purpose of concealing income. The assessee claimed the expenses under a bonafide belief that they were genuine business expenses. The Ld. CIT(A) observed that there was no deliberate attempt to conceal income, as the expenses were incurred in a prior period but claimed in the current year. The CIT(A) also referenced relevant case laws, including the decision in Hero Honda Motors Limited vs. DCIT, to support the assessee's position.

The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the assessee's conduct did not warrant the imposition of a penalty under section 271(1)(c). The Tribunal agreed that the assessee did not deliberately furnish inaccurate particulars to conceal income, and the explanation provided was bonafide. Referring to the decision in CIT vs. Reliance Petro Products Ltd., the Tribunal concluded that the assessee should not be penalized for a genuine claim that was not accepted by the Assessing Officer. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty.

In conclusion, the Tribunal's decision was based on the bonafide belief of the assessee regarding the prior period expenses, the absence of deliberate concealment of income, and the application of relevant case laws supporting the assessee's position. The Tribunal found no reason to interfere with the Ld. CIT(A)'s order and upheld the decision to delete the penalty imposed by the Assessing Officer.