2015 (10) TMI 63 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on provisions for bad and doubtful debts - Held that - This is not denied that the particulars of provisions of doubtful debts have duly been shown by the assessee and debited in the audited profit and loss account. It is also not denied that the assessee has submitted the explanation in reply to show cause notice issued by the Assessing Officer. Even though the Assessing Officer, in our opinion, failed to discharge his onus as he was not sure at the initiation of penalty u/s 271(1)(c) for which specific charge penalty has been initiated by the Assessing Officer. Even while levying the penalty also, the Assessing Officer simply relied on the explanation to Section 271(1)(c) even though he levied the penalty for furnishing the inaccurate particulars of income. This is apparent from the provisions of Section 271(1)(c) that explanation of Section 271(1)(c) is not applicable in case inaccurate particulars are furnished. Therefore, in our opinion, the basis of levy of penalty itself is not correct. As decided in CIT vs. New Sorathia Engineering Co. vs. CIT, 2006 (1) TMI 71 - GUJARAT HIGH COURT it is incumbent upon the Assessing Officer to state whether penalty was being levied for concealment of particulars of income by the assessee or whether any inaccurate particulars of income had been furnished by the assessee. - Penalty levied quashed - Decided in favour of assessee.

Summary

Issues:
- Appeal against cancellation of penalty u/s 271(1)(c) of the Income-tax Act, 1961.

Analysis:
1. The Assessing Officer imposed a penalty u/s 271(1)(c) on the assessee for furnishing inaccurate particulars of income without specifying the charge of concealment or inaccuracy. The CIT(A) found the omission of adding provisions for bad debts in income computation as a genuine mistake by the assessee due to which the penalty was cancelled.

2. The CIT(A) highlighted the absence of a motive for excess claim due to carried forward losses and unabsorbed depreciation, supporting the decision to cancel the penalty. The authorized representative cited relevant case laws to argue against penalty imposition for a mistake that was promptly rectified by the assessee.

3. The Senior DR argued that the claim withdrawal was not voluntary but done upon the Assessing Officer's notification. However, the Tribunal noted the Assessing Officer's failure to clarify the specific charge for penalty initiation, contrary to legal requirements.

4. The Tribunal referred to Section 271(1)(c) of the Income-tax Act, emphasizing the distinction between concealing income particulars and furnishing inaccurate particulars. The Explanation (1) was found inapplicable in the case of furnishing inaccurate particulars. The Tribunal, following a precedent, quashed the penalty due to the incorrect basis of penalty imposition.

5. Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the cancellation of the penalty u/s 271(1)(c) based on the inadequacy of specifying the penalty charge and the genuine nature of the mistake made by the assessee in omitting the bad debts provision in income computation.