2014 (1) TMI 747 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Disallowance on account of loss on assets written off and on software expenses Held that - The assessee had disclosed the material facts before the AO and CIT(A) - When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars - What is to be seen is whether the said claim made by the assessee was bona fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty under section 271(1)(c) of the Ac - Decision of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT 2012 (9) TMI 775 - SUPREME COURT followed - a bonafide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income, can only be described as a human error which one is prone to make - Absence of due care does not mean that the assessee is guilty of either furnishing of inaccurate particulars or attempting to conceal its income Thus, penalty u/s 271(1)(c) could not be levied Decided in favour of Assessee.

Summary

Issues:
Penalty under Section 271(1)(C) for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Disallowance on account of loss of assets written off - Rs. 4,37,708/-
The Assessing Officer disallowed the claimed loss on assets written off, considering it as not allowable as per law. The CIT(A) upheld the penalty, stating that the appellant furnished inaccurate particulars of income knowingly. The CIT(A) emphasized the need for a bona fide explanation supported by reliable evidence, citing relevant case laws. The CIT(A) differentiated the appellant's reliance on judgments to justify the claim, emphasizing the deliberate nature of the claim and lack of substantiation. The CIT(A) limited the penalty to 100% of the concealed income, granting partial relief to the appellant.

Issue 2: Disallowance on account of software expenses - Rs. 67,200/-
Regarding the disallowance of software expenses claimed as revenue expenditure, the appellant argued it was a difference of opinion and not deliberate concealment. The Assessing Officer considered the claim mala fide, leading to the penalty imposition. The appellant contended full disclosure in the return of income and profit and loss account, citing relevant case laws to support their position. The ITAT held that if the explanation offered is not false and is bona fide, penalty should not be imposed. The ITAT referred to a Supreme Court decision where inadvertent errors did not constitute concealment. Based on the facts presented and the legal precedent, the ITAT canceled the penalty, concluding that the appellant had furnished all necessary facts and did not warrant penalty under Section 271(1)(C).

In conclusion, the ITAT allowed the appeal of the Assessee, canceling the penalty imposed by the Assessing Officer. The judgment highlighted the importance of bona fide explanations supported by evidence and emphasized that inadvertent errors do not amount to concealment of income.