2019 (1) TMI 1631 - HC - Income Tax

Penalty levied u/s 271(1)(c) - reporting of profits by filing wrong estimate of income of expenditure - HELD THAT - Tribunal pressed in service several grounds for deleting the penalty. It is not necessary to examine such grounds since only on the first ground recorded by the Tribunal, it is possible to sustain the judgment. The Tribunal noted that the addition of ₹ 28.62 crores made by the CIT(A) was on account of reworking of the estimated project cost based on actual cost incurred upto 31.03.2013. The Tribunal noted that against the cost of estimated cost ₹ 1628.02 crores, the CIT(A) adopted a sum of ₹ 1425.19 crores as the actual expenditure incurred on the project till the year end. The Tribunal noted that rest of the calculations made by the CIT(A) were directly related to the change in method of accounting rejecting the assessee's figures and the method of accounting in this regard. The Tribunal, therefore, observed that whatever be the better method of accounting, this was not a case of concealment of income leading to penalty. Tribunal noted that the addition of ₹ 28.62 crores had the genesis in the estimation on one side and preponement of the expenditure on the other, based on change of method of accounting. Thus, in clear terms the Tribunal found that the assessee had neither concealed the income nor concealing the particulars of such income. The penalty was, therefore, correctly deleted.

Summary

Issues:
Imposition of penalty under Section 271(1)(c) of the Income Tax Act,1961 for Assessment Year 2009-10.

Analysis:

The appeal was filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal regarding the deletion of penalty under Section 271(1)(c) of the Income Tax Act. The main issue revolved around whether the Tribunal was justified in deleting the penalty without appreciating the circumstances leading to the penalty imposition. The respondent assessee, a private limited company, had its taxable income enhanced by the CIT(A), leading to penalty proceedings. However, the Tribunal, in its judgment, deleted the penalty imposed under Section 271(1)(c) of the Act. The Tribunal based its decision on the fact that the addition made by the CIT(A) was due to a reworking of the estimated project cost based on actual costs incurred, and not due to concealment of income. The Tribunal highlighted that the changes in accounting methods were the primary reason for the discrepancy in estimated and actual costs, and concluded that this did not amount to concealment of income, justifying the deletion of the penalty.

The Tribunal emphasized that the addition of ?28.62 crores was a result of estimation on one side and preponement of expenditure on the other, triggered by a change in the accounting method. It was clarified that the difference in estimated and actual costs was not indicative of income concealment by the assessee, but rather a consequence of accounting methodology. The Tribunal's decision to delete the penalty was supported by the fact that the assessee had not concealed income or any particulars related to it. Additionally, the Tribunal applied the same principles to other additions for which the penalty was imposed, further solidifying its stance that no concealment of income existed in the case. Ultimately, it was concluded that no question of law arose in this matter, leading to the dismissal of the tax appeal.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalty imposed under Section 271(1)(c) of the Income Tax Act, emphasizing that the discrepancies in estimated and actual costs were primarily due to changes in accounting methods and did not amount to concealment of income by the assessee. The judgment highlighted the importance of accounting practices in determining tax liabilities and penalties, ultimately dismissing the tax appeal filed by the Revenue.