2015 (6) TMI 1172 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance u/s. 43B - VRS payment claimed excessively came to their notice during the course of scrutiny - Held that - As rightly pointed out by CIT(A) with regard to the VRS claim as soon as it had come to the notice of the assessee the same was accepted. In fact it was the assessee who brought the same to the notice of the Assessing Officer. Similarly copy of printed annual report of 2003-04 shows consolidated prior period figures for all the units and having regard to the circumstances of the case learned CIT(A) observed that it was not in the nature of furnishing inaccurate particulars even though the claim was not allowable. CIT(A) also observed that disallowance u/s. 43B is merely a technical disallowance and it cannot be inferred that it amounts to furnishing of inaccurate particulars or concealment of income. In our opinion the order passed by CIT(A) is based on cogent material and hence deserves to be accepted. Since explanation given by the assessee is substantiated by furnishing relevant particulars. It is for the Revenue to prove that the explanation furnished by the assessee is false. Whereas in the instant case no such material was furnished by the Revenue - Decided against revenue.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act set aside by CIT(A) - Revenue's appeal before ITAT Mumbai.

Analysis:
1. The appellant, engaged in engineering and contracting business, declared a loss for the relevant assessment year. The Assessing Officer disallowed certain deductions, added back amounts, and initiated penalty proceedings under section 271(1)(c) due to alleged discrepancies in VRS payments, prior period income, and statutory liabilities.

2. The ITAT, 'J' Bench, directed the Assessing Officer to re-examine the penalty issue. The Assessing Officer, after considering the explanation, levied the penalty. The appellant argued that penalty imposition without revising the return was unjustified, citing High Court decisions where inadvertent errors were disclosed before assessment completion.

3. The CIT(A) reviewed the penalty grounds. Regarding VRS claims, the appellant voluntarily disclosed the error before assessment completion, which the Assessing Officer failed to appreciate. The CIT(A) found the penalty unsustainable and deleted it. Similarly, for prior period adjustments and disallowances under section 43B, the CIT(A) ruled that although the claims were disallowed, they did not amount to furnishing inaccurate particulars or concealment of income, hence the penalties were unjustified and deleted.

4. The Revenue appealed the CIT(A)'s decision before ITAT Mumbai. The Departmental Representative contended that the burden of proof lies on the assessee to show the disallowances were not due to inaccurate particulars or concealment, emphasizing the lack of proper explanation by the assessee.

5. ITAT Mumbai upheld the CIT(A)'s decision, noting that the VRS claim error was promptly rectified by the assessee, and the disallowed claims did not constitute inaccurate particulars or concealment. The order was based on substantial evidence, and as the Revenue failed to provide contradictory material, the appeal was dismissed, affirming the CIT(A)'s decision.

This comprehensive analysis outlines the issues, arguments, decisions, and reasoning involved in the legal judgment concerning the penalty levied under section 271(1)(c) of the Income Tax Act, as handled by the ITAT Mumbai and CIT(A).