2016 (9) TMI 1446 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - advance received being treated as income for the relevant assessment year - non deduction of tds - CIT-A deleted the addition - Held that - CIT(A) deleted the penalty since assessee had filed revised return of income before the discovery of the concealment by the AO - thus we are of the view that the decision of the CIT(A) is in accordance with law & merit when such advances was treated as the income for the same year during the earlier assessment proceedings, the assessee had accepted the same to avoid confrontation with the Revenue and further revised her return for the subsequent AY being the relevant AY - Decided in favor of assessee. Penalty levied on account of addition made for non-deduction of tax - Held that - it is only an inadvertent mistake committed by the Accountant of the assessee - therefore we are of the view that penal provisions of section 271(1)(c) cannot be invoked in the case of the assessee - hence we hereby uphold the decision of the CIT(A) for deleting the entire penalty - Decided in favor of assessee.

Summary

Issues:
1. Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act.
2. Non-disclosure of income and non-deduction of tax at source.

Analysis:
1. The appeal was filed by the Revenue against the deletion of penalty of Rs. 1,1611,202/- under section 271(1)(c) of the Income Tax Act by the Commissioner of Income Tax (Appeals). The crux of the issue was the disagreement on the penalty imposition related to non-disclosure of income and non-deduction of tax at source.

2. The case involved an assessee engaged in the profession of cine artist and modeling who initially filed a return of income for the assessment year 2010-11, admitting a total income of Rs. 89,69,894/-. Subsequently, a revised return was filed declaring a total income of Rs. 4,41,40,950/-, including advances received. During assessment, it was found that tax had not been deducted at source for certain payments, leading to disallowance under section 40(a)(ia) of the Act.

3. The penalty proceedings were initiated by the Assessing Officer under section 271(1)(c) of the Act. The reasons cited for penalty imposition were twofold: firstly, non-disclosure of disallowed amount under section 40(a)(ia) and secondly, concealment of income by not disclosing advances received initially in the return. The Commissioner of Income Tax (Appeals) deleted the penalty related to advances received as income, considering the revised return filed by the assessee before the concealment was discovered.

4. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the circumstances of the case. It was noted that the assessee had accepted the advances as income during earlier assessment proceedings to avoid disputes with the Revenue. Additionally, the penalty for non-deduction of tax was considered inadvertent and not invoking the penal provisions of section 271(1)(c) was deemed appropriate. Consequently, the Tribunal dismissed the Revenue's appeal and upheld the deletion of the entire penalty amount of Rs. 1,1611,202/-.

5. In conclusion, the Tribunal found the decision of the Commissioner of Income Tax (Appeals) to be legally sound and justified in the context of the case. The assessee's actions regarding the treatment of advances as income and the inadvertent error in tax deduction were pivotal factors leading to the deletion of the penalty. The appeal by the Revenue was therefore dismissed, affirming the decision in favor of the assessee.