2012 (11) TMI 666 - AT - Income Tax

Penalty under section 271(1)(c) Concealment of Income and furnishing of inaccurate particulars - held that - The addition made in the assessment cannot ipso facto lead to the inference that there has been concealment of income or furnishing of inaccurate particulars of such income by the assessee. In the aforesaid context, the acceptance of addition by the assessee for buying peace with the department will not lead to an inference that the assessee has admitted concealing particulars of its income or furnishing inaccurate particulars of income. Further Held that - Contention of assessee that he is following the same method of valuation of closing stock consistently from its very inception and the department has never raised any objection with regard to the method of valuation of closing stock adopted by the assessee. In the aforesaid background, it cannot be said that the assessee has furnished inaccurate particulars of its income. Similarly, with regard to the addition made on account of cash payments above Rs.20,000/- which was disallowed u/s 40A(3) and also the claim of expenditure in the Profit & Loss A/c towards stamp duty the finding of the CIT (A) that such additions cannot lead to the conclusion that the assessee has furnished inaccurate particulars of income is quite acceptable - appeal of revenue is dismissed - in favour of assessee. Decision of Supreme court in case of COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS FVT. LTD 2010 (3) TMI 80 - SUPREME COURT , followed.

Summary

Issues:
- Imposition of penalty u/s 271(1)(c) for allegedly furnishing inaccurate particulars of income.

Analysis:
1. The Revenue appealed against the CIT (A)'s order deleting the penalty imposed u/s 271(1)(c) for the assessment year 2003-04.
2. The primary issue was whether the CIT (A) was justified in deleting the penalty imposed by the AO for furnishing inaccurate particulars of income.
3. The AO initiated penalty proceedings based on additions made to the assessment, including valuation of closing stock, disallowance u/s 40A(3), and unexplained expenditure u/s 69.
4. The assessee contended that the valuation of closing stock was consistently done based on earlier years' figures and method accepted by the department.
5. The CIT (A) found discrepancies in the AO's valuation method for the closing stock, concluding that it did not reflect the correct income of the assessee for the relevant year.
6. Regarding disallowance u/s 40A(3) and expenditure on stamp duty, the CIT (A) held that these additions did not amount to furnishing inaccurate particulars of income.
7. The Revenue argued that since the assessee did not challenge the additions, penalty imposition was justified.
8. The assessee maintained that the additions were accepted to avoid disputes, not as an admission of furnishing inaccurate particulars.
9. The ITAT observed that the AO's valuation method for closing stock was flawed, and the consistent method followed by the assessee did not indicate inaccurate particulars of income.
10. The ITAT upheld the CIT (A)'s decision to delete the penalty, citing that acceptance of additions does not imply concealment or furnishing of inaccurate particulars.

In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT (A)'s decision to delete the penalty imposed u/s 271(1)(c) based on valid reasons and the consistent valuation method employed by the assessee.