2010 (6) TMI 885 - AT - Income Tax

Summary

Issues involved: The appeal challenges the levy of penalty u/s 271(1)(c) amounting to Rs. 1,40,000 by the Ld. Commissioner of Income Tax (Appeals) for the assessment year 2006-07.

Details of the Judgment:

Issue 1: Sale of Car
The Assessing Officer observed that the assessee, a Private Limited Company engaged in manufacturing cum trading, claimed a loss on the sale of a car in the profit and loss account but did not add it back in the computation of income. The Assessing Officer made an addition of Rs. 15,194 on this account and initiated penalty proceedings. The assessee contended that the mistakes were bonafide, but the Assessing Officer levied the penalty under section 271(1)(c).

Issue 2: Set off of Brought Forward Loss
The Assessing Officer disallowed the set off of brought forward business loss against income from house property, citing that it is not permissible u/s 72 of the Act. The penalty was levied as the Assessing Officer concluded that the assessee deliberately ignored the explicit provisions of the law. The Ld. Commissioner of Income Tax (Appeals) upheld the penalty, referring to the decision in the case of C.I.T. vs. Escorts Finance Ltd.

Judgment:
The ITAT Delhi found that the assessee had disclosed the loss on the sale of the car in the profit and loss account but omitted to exclude it in the computation of income. The tribunal held that this omission did not amount to concealment or furnishing inaccurate particulars, as the loss was disclosed. Regarding the adjustment of brought forward loss, the tribunal noted that the disclosure of the adjustment was apparent, and the mistake was not deliberate concealment. The tribunal referred to relevant case laws and emphasized that penalty should not be imposed for technical breaches or bonafide beliefs. Citing various legal precedents, including the decision in the case of Reliance Petro Products Ltd., the tribunal set aside the penalty of Rs. 1,40,000.

Outcome:
The ITAT Delhi allowed the appeal filed by the assessee and deleted the levy of the penalty.