2019 (11) TMI 1637 - AT - Income Tax

Penalty u/s 271(1)(c) - addition of interest - mismatch of professional receipts as reflected in Form 26AS and as shown in Income Tax Return - penalty has been confirmed by the Ld. CIT(A) holding that if assessee s case would not have come for scrutiny proceedings the concealment would have remain undetected and it is difficult to believe that the Chartered Accountant who has carried out the audit u/s 44AB and filed the Income Tax Return could have committed mistake - HELD THAT - Assessee is practicing corporate lawyer whose accounts are duly audited and entire computation of income and filing of Income Tax Return is handled by professional Chartered Accountant. As the professional fees which was reflected in Form 26AS but not in the Income Tax Return then definitely it is a mistake on the part of the professional who has audited the accounts and filed the Income Tax Return. As been stated before the authorities that this amount was shown under the head advances and same has been offered to tax in the subsequent year. Though such a professional receipt has wrongly been reflected under the head advance when assessee is following cash system of accounting but it cannot be held that there is any kind of concealment of income or furnishing of inaccurate particulars. Once even before the scrutiny proceedings the assessee had offered the amount for tax on the same professional receipts in the subsequent year then that goes to prove that assessee had not deliberately tried to conceal her income or furnish any inaccurate particulars. This amount has been reflected in the books of accounts and in the audit report though wrongly taken under the head advances . It be held that assessee had concealed any income when entire income is through cheque and duly disclosed in the books and even tax has been paid in subsequent year when rates of taxes are same and there is no loss of revenue. Thus penalty on such amount cannot be upheld. The same is directed to be deleted. Addition on account of interest is mainly on the ground that assessee had shown the interest income net of TDS instead of gross amount - This again is a mistake of professional who has filed the income tax return. Such a mistake does not lead to any conclusion at assessee has deliberately concealed the income or not paid any taxes. On this addition also no penalty can be sustained. Accordingly the same is directed to delete.

Summary

Issues:
Levy of penalty under section 271(1)(c) for mismatch in professional receipts and interest income.

Analysis:
The appellant, an individual engaged in the legal profession, filed an appeal against the penalty imposed under section 271(1)(c) due to discrepancies in professional receipts and interest income. The AO noted a mismatch in professional receipts as per Form 26AS and the Income Tax Return, and an addition of ?40,00,053 was made as professional receipts. Similarly, an addition of ?1,43,578 was made on account of interest income discrepancies. The AO imposed a penalty of ?14,08,240, which was confirmed by the Ld. CIT(A) based on the belief that the concealment would have remained undetected without scrutiny. The appellant argued that the discrepancies were due to a mistake by the Chartered Accountant, and relied on various decisions, including the Price Water House Coopers case. The appellant contended that there was no deliberate concealment or furnishing of inaccurate particulars.

The Tribunal considered the submissions and found that the professional fees discrepancy was due to the Chartered Accountant's error in reflecting the amount under 'advances' instead of receipts, which was later offered for tax in the subsequent year. The Tribunal held that this did not amount to concealment as the income was disclosed in the books and tax was paid in the subsequent year. Therefore, the penalty on this amount was deleted. Similarly, the Tribunal found that the interest income discrepancy, shown net of TDS instead of gross amount, was a professional mistake and did not indicate deliberate concealment. Consequently, the penalty on this addition was also deleted. The Tribunal allowed the appeal, directing the deletion of the penalties imposed.

In conclusion, the Tribunal ruled in favor of the appellant, highlighting that the discrepancies in professional receipts and interest income were due to professional errors and did not amount to deliberate concealment or furnishing of inaccurate particulars. The penalties imposed under section 271(1)(c) were deleted, and the appeal was allowed.