2015 (8) TMI 410 - AT - Income Tax

Levy of penalty u/s.271(1)(c) - discrepancies, interpolation and over-writings done by the assessee after the assessment was completed so as to avoid the penalties - Held that - As assessee did produce the Books of Accounts, bills and vouchers as maintained by him. Admittedly Assessing Officer found that there are certain additional amounts which are debited in some months and the difference on that was arrived an amount of ₹ 88,000/-. Further, he also found out that assessee did not furnish the vouchers nor provided evidence, for the payments made in the month of January to March, 2005 totalling to ₹ 1,37,800/-. Nowhere there is an allegation in the assessment order that assessee has manipulated or tampered with the records. We are unable to understand the need for assessee to tamper the registers after addition has been made in the assessment. The so called discrepancies that were noticed by the Assessing Officer in the penalty order were not figuring in the assessment order at all. Since there is no need for the assessee to make any changes in the registers, we are unable to understand how, even if subsequently tampered with the registers, would attract penalty on an amount made as agreed addition in the assessment order We are of the opinion that just because certain expenditure claimed is not supported in the course of assessment proceedings, it will not lead automatically to concealment of income. Considering the order of the Assessing Officer, we are of the opinion that some disallowances made out of the claims made by the assessee, without proving them to be non-genuine, penalty u/s.271(1)(c) cannot be levied - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s.271(1)(c) of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) on the issue of penalty under section 271(1)(c) of the Income Tax Act. The Assessing Officer had made an addition to the total income of the assessee due to discrepancies in the wages account, which the assessee accepted. The Assessing Officer then initiated penalty proceedings, alleging that the assessee deliberately furnished inaccurate particulars of income to avoid penalties. The penalty was levied at Rs. 1,95,000.

Before the CIT(A), the assessee argued that the discrepancies were genuine mistakes and there was no intention to manipulate or interpolate the records to avoid tax payment. However, the CIT(A) upheld the penalty, concluding that the assessee willfully tampered with the books of accounts to evade tax. The assessee contended that the observations regarding tampering were unwarranted and that the discrepancies were unintentional errors in the business operations. The Assessing Officer and CIT(A) maintained that the tampering was deliberate, justifying the penalty imposition.

The ITAT Hyderabad considered the contentions and reviewed the orders and documents. It was established that the assessee supplied labor to various industries and had units outside the state. The Assessing Officer made additions based on discrepancies in the wages account, but there was no allegation of manipulation in the assessment order. The ITAT found no reason for the assessee to tamper with the records after the additions were agreed upon during assessment. The discrepancies noted during the penalty order were not raised in the assessment order. The ITAT concluded that no penalty was warranted as the additions were agreed upon, and there was no evidence of deliberate concealment or furnishing inaccurate particulars. The ITAT canceled the penalty and allowed the assessee's appeal.

In conclusion, the ITAT Hyderabad allowed the appeal of the assessee, canceling the penalty under section 271(1)(c) of the Income Tax Act.