2014 (3) TMI 1136 - AT - Income Tax

Penalty u/s. 271(1)(c) - non deduction of tds - Held that - It was the duty of the payer to deduct TDS. It appears that the payer namely Vodafone Essar Gujarat Ltd. deducted no TDS on interest income of ₹ 23,800/- and due to this mistake, the assessee has not shown this income in the books of accounts. Similarly, due to late receipt of statement and clerical error at accounting method, the assessee has shown less receipt of 1,26,916/- from Vodafone Essar Gujarat Ltd. Prima-facie it appears that both these mistakes are bonafide for which penalty u/s 271(1)(c) is not leviable. Therefore, cancel the penalty of ₹ 23,800/- levied by the AO u/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income-tax Act for the Assessment Year 2009-10.
2. Concealment of income related to interest income and discount received from Vodafone Essar Gujarat Ltd.
3. Bonafide mistakes leading to discrepancies in income disclosure.
4. Admissibility of penalty under section 271(1)(c) for the said discrepancies.

Analysis:

Issue 1: Confirmation of Penalty
The appeal was against the order confirming a penalty of Rs. 23,800 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act. The CIT(A) upheld the penalty based on the appellant's concealment of income.

Issue 2: Concealment of Income
The appellant concealed interest income of Rs. 22,500 and discounts received amounting to Rs. 1,26,916 from Vodafone Essar Gujarat Ltd. The assessing officer found this to be intentional concealment, attracting penalty under section 271(1)(c) of the IT Act.

Issue 3: Bonafide Mistakes
The appellant argued that the non-disclosure of interest income was due to Vodafone Essar Gujarat Ltd.'s failure to deduct TDS. Additionally, a shortfall in disclosed income from the same entity was attributed to late receipt of statements and clerical errors, both deemed as bonafide mistakes.

Issue 4: Admissibility of Penalty
The appellant contended that the discrepancies were unintentional and not indicative of tax evasion. The Tribunal agreed, considering the mistakes as bonafide errors. Consequently, the penalty of Rs. 23,800 under section 271(1)(c) was canceled.

In conclusion, the Tribunal allowed the appeal, emphasizing that the errors in income disclosure were bonafide and not deliberate attempts to evade taxes. The decision to cancel the penalty was based on the understanding that the discrepancies arose from genuine mistakes rather than intentional concealment.