2012 (7) TMI 764 - AT - Income Tax

Challenging the penalty levy u/s.271(1)(c) - Held that - Considering the conduct of the assessee company at the assessment / re-assessment stage revised return was filed under which income u/s.115JB was declared and the normal provision but assessee did not add back the provision for risk inventory - It was only when the A.O. pointed out in the reassessment proceedings then the assessee agreed for the disallowance of the provisions for risk inventory. The above factual matrix clearly show that the intention of the assessee company was not bonafide - assessee submission that in the earlier year such a provision was added back in the computation of income which again show that the omission for not adding back the provision this year is not a bonafide mistake - When the assessee in computation of income claim expenses/provisions not allowable as deductions, the assessee is liable to pay penalty - against assessee.

Summary

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

Analysis:
1. The Revenue appealed against the deletion of a penalty of Rs.7,87,968/- under section 271(1)(c) by the Ld. CIT(A). The penalty was based on a discrepancy in the provision for risk inventory in the assessee's return of income. The A.O. disallowed this claim and initiated penalty proceedings. The assessee argued that it was a genuine mistake and requested dropping the penalty.

2. The A.O. concluded that the assessee had furnished inaccurate particulars of income by claiming the provision for risk inventory which was not allowable. Relying on the Supreme Court's decision in Union of India vs. Dharmendra Textile Processors & Ors., the penalty was levied. However, the Ld. CIT(A) deleted the penalty, considering the claim to be in line with the regular accounting policy followed by the appellant. The Ld. CIT(A) also referenced decisions in the cases of Dilip N. Shroff vs. DCIT and Kanbay Software India (Pvt.) Ltd. to support the deletion of the penalty.

3. The Revenue challenged the Ld. CIT(A)'s decision before the ITAT. The DR supported the A.O.'s findings, while the assessee's counsel maintained that the mistake was inadvertent and bonafide. The counsel cited precedents from ITAT Mumbai to strengthen the argument.

4. The ITAT analyzed the conduct of the assessee during assessment and reassessment stages. It noted that the assessee did not rectify the provision for risk inventory discrepancy until pointed out by the A.O. The ITAT found the assessee's conduct not to be bonafide, contrary to the Ld. CIT(A)'s view. Referring to the decision in Zoom Communication (P.) Ltd., the ITAT held that the claim for deduction, not being bonafide, amounted to concealment of income. Consequently, the ITAT reversed the Ld. CIT(A)'s decision and confirmed the levy of the penalty, restoring the A.O.'s penalty order.

5. In conclusion, the ITAT allowed the Revenue's appeal, upholding the penalty under section 271(1)(c) for inaccurate particulars/concealment of income.