2015 (10) TMI 810 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made u/s 43B - assessee furnished inaccurate particulars of income to reduce the taxable income and did not substantiate its claim of expenses - Held that - Merely because there were some discrepancies, it cannot be held that the assessee intended to evade tax. The assessee had rectified the same and had accepted the mistake before the AO. The assessee also chose not to prefer appeal before the first appellate authority, itself shows that the mistakes were not wilfull. For this act of assessee penalty u/s 271(1)(c) may not be levied in respect of the addition made u/s 43B, the assessee had declared in the audit report the bonafide error which do not find place in the return filed by the assessee.The delayed payment in respect of employees contribution to PF & ESI needs to be given liberal approach. Employer/employees contribution towards provident fund payments made after the due date prescribed under the Employees Provident Fund Act and Rules made there under but before the due date for furnishing the return of income under sub sec. 1 of sec. 139 of the Act, are allowable under s.36(1)(va) read with sec. 2(24)(x) and sec. 43B of the Act. This is not a fit case for levy of penalty u/s 271(1)(c) as there has been no concealment on behalf of the assessee. The error that was brought to the notice in respect of depreciation was a bonafide error, which was corrected by the assessee by filing revised return during the assessment proceedings. The remaining additions made by the AO do not call for levy of penalty under this provision because these are mere disallowances made by the AO but not conclusive evidence of concealment. We, therefore, by keeping in view the ratio laid down in the judgment of Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ) and Price Water House Coopers Pvt. Ltd. vs. CIT reported in (2012 (9) TMI 775 - SUPREME COURT) passed by the Hon ble Supreme Court and jurisdictional High court in the case of of DCIT vs. Nepa Limited reported in (2015 (10) TMI 63 - ITAT INDORE) delete the penalty u/s 271(1)(c) of the Act levied by the AO and confirmed by the ld. CIT(A). - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income.
2. Addition of excess depreciation on Plant & Machinery.
3. Non-capitalization of custom duty and shipping expenses.
4. Addition of unpaid statutory liabilities under Section 43B.
5. Late deposit of employees' share of PF & ESI.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) for Furnishing Inaccurate Particulars of Income:
The primary issue was whether the penalty of Rs. 11,49,000/- under Section 271(1)(c) was justified. The Assessing Officer (AO) initiated penalty proceedings on the grounds that the assessee had furnished inaccurate particulars of income to reduce taxable income. The AO concluded that the assessee failed to substantiate its claims of expenses, invoking Explanation 1 of Section 271(1)(c). The penalty was confirmed by the CIT(A).

2. Addition of Excess Depreciation on Plant & Machinery:
The AO added Rs. 24,56,003/- for excess depreciation claimed on Plant & Machinery. The assessee conceded discrepancies in its calculation and revised the depreciation claim from Rs. 72,16,906/- to Rs. 47,60,903/-. The mistake was due to an incorrect value of Plant and Machinery being recorded as Rs. 1,85,56,622/- instead of Rs. 18,55,862/-.

3. Non-Capitalization of Custom Duty and Shipping Expenses:
The AO added Rs. 3,50,021/- for custom duty and Rs. 98,766/- for shipping expenses, which the assessee treated as revenue expenses instead of capitalizing them. The AO disallowed these claims and added them to the income.

4. Addition of Unpaid Statutory Liabilities under Section 43B:
The AO added Rs. 3,14,215/- for unpaid statutory liabilities under Section 43B, despite the assessee's claim that these were paid before the due date for furnishing the return of income under Section 139(1). The AO included this amount while computing the income for the year under consideration.

5. Late Deposit of Employees' Share of PF & ESI:
The AO added Rs. 1,94,244/- for the late deposit of employees' share of PF & ESI, which was not paid within the due date prescribed under the Act. The assessee argued that the amount was deposited before filing the return, although beyond the due date.

Tribunal's Findings:
The Tribunal considered the rival submissions and material on record. It observed that the assessee's mistakes were bona fide and corrected by filing a revised return before the assessment's completion. The Tribunal noted that mere discrepancies do not indicate an intention to evade tax. The assessee's acceptance of the mistakes and non-appeal against the assessment order indicated no willful intent to evade tax.

For the addition under Section 43B, the Tribunal noted that the error was bona fide and disclosed in the audit report. Regarding the late deposit of PF & ESI, the Tribunal cited judgments allowing such payments if made before the due date for filing the return.

The Tribunal distinguished the case from the jurisdictional High Court's judgment in CIT vs. Arcotech Ltd., noting that the assessee in this case had substantiated its claims and corrected mistakes, unlike in Arcotech.

Conclusion:
The Tribunal held that the AO had initiated penalty proceedings for concealing particulars of income but levied the penalty for furnishing inaccurate particulars of income under Explanation 1 to Section 271(1)(c). The Tribunal clarified that Explanation 1 applies to concealment, not furnishing inaccurate particulars. It concluded that the assessee's errors were bona fide and corrected, and the additions did not constitute conclusive evidence of concealment. Therefore, the penalty under Section 271(1)(c) was not justified. The Tribunal allowed the appeal and deleted the penalty.

Result:
The assessee's appeal was allowed, and the penalty under Section 271(1)(c) was deleted.