2018 (11) TMI 1851 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance of unpaid property tax as not paid before the due date for filing of return - HELD THAT - AO levied the penalty not appreciating the submissions of the assessee and the Ld.CIT(A) sustained the penalty. On a totality of the facts and circumstances as narrated above, we find that the mistake of not disallowing the property tax paid appears to be a bonafide mistake and in any case the said expenses are not in doubt but only the allowability of the year. It is not known as to what details the Assessing Officer has called for, however, the assessee by letter dated 15.03.2013 surrendered same and it was submitted that it is a bonafide mistake. In the circumstances, we do not see any concealment of income or furnishing of inaccurate particulars but it is only due to oversight assessee did not disallow the unpaid property tax during this assessment year which was ultimately allowed as expenses in assessment year 2012-13. Thus, we direct the Assessing Officer to delete the Penalty Order u/s. 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for disallowance of property tax expenses.

Analysis:
The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act for disallowance of property tax expenses. The Assessing Officer noted that the assessee debited unpaid property tax to the profit and loss account without disallowing it under section 43B of the Act. The assessee later realized the mistake and offered the amount for taxation under section 43B. The contention was that it was an inadvertent mistake and not willful suppression of facts. The Commissioner of Income-tax (Appeals) upheld the penalty. The assessee argued that the expenses were allowed as a deduction in a previous assessment year when the payment was made, and there was no willful concealment. The Tribunal found that the mistake of not disallowing the property tax was a bona fide error and not a case of concealment or furnishing inaccurate particulars. The Tribunal referred to the Supreme Court decision in Price Waterhouse Coopers v. CIT to support its decision. Consequently, the Tribunal directed the Assessing Officer to delete the penalty under section 271(1)(c) of the Act, and the appeal of the assessee was allowed.

This case involved the interpretation of section 271(1)(c) of the Income Tax Act regarding the imposition of penalties for disallowance of expenses. The primary issue was whether the failure to disallow property tax expenses under section 43B was a deliberate act of concealment or an inadvertent mistake. The assessee contended that the expenses were inadvertently not disallowed and were later rectified upon realizing the error. The Tribunal considered the facts and circumstances, noting that the mistake appeared to be bona fide, with no intention to conceal income. The Tribunal emphasized that the expenses' genuineness was not in doubt, and the issue revolved around the timing of their allowability. The decision was based on the principle that inadvertent errors should not attract penalties under section 271(1)(c) if there was no willful suppression of facts or furnishing of inaccurate particulars.

The Tribunal's analysis focused on the assessee's submission that the failure to disallow property tax expenses was a genuine mistake rectified during assessment proceedings. The Tribunal noted that the assessee promptly corrected the error upon realizing it and requested the Assessing Officer to disallow the expenses. The Tribunal considered the assessee's reliance on legal precedents, including the Supreme Court decision in Price Waterhouse Coopers v. CIT, to support the argument that the mistake was inadvertent and not indicative of willful concealment. The Tribunal found that the penalty was unjustified in this case, given the nature of the error and the assessee's proactive steps to rectify it. Consequently, the Tribunal directed the Assessing Officer to delete the penalty under section 271(1)(c) of the Act, emphasizing the absence of deliberate concealment or furnishing of inaccurate particulars in the assessee's actions.