2016 (4) TMI 211 - AT - Income Tax

Penalty u/s 271(1)(c) - loss on sale of fixed asset in its books of accounts and the same was shown in the audited profit and loss account - Held that - As during preparing computation of income loss on sale of fixed assed being disallowable expenditure was not added back to the profit as per profit and loss account resulting in showing total income less by 2, 07, 551/-. On coming across this fact during assessment proceedings itself assessee accepted the mistake and agreed for adding the amount of 2, 07, 551/- to the total income. Assessing Officer went ahead imposing penalty u/s 271(1)(c) of the Act at 70, 550/- for concealment of income and furnishing of inaccurate particulars of income. We also find that assessee is a regular income-tax payee and books of accounts are audited u/s 44AB of the Act and income has been declared. Loss on sale of fixed asset at 2, 07, 551/- was shown in audited profit and loss account and this impugned loss has been the result of sale of fixed asset and so this transaction certainly has travelled in the books of account and got placed in the audited financial statement and therefore there cannot be any concealment of particulars in this case. We also find that Hon ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd. vs. CIT (2012 (9) TMI 775 - SUPREME COURT ) has dealt similar issue and while adjudicating the issue provisions towards payment of gratuity which was not allowable expenditure was not added back to the total income even if indicated in the tax audit report and their lordships have decided the same in favour of assessee

Summary

Issues:
Penalty u/s 271(1)(c) for concealment of income and furnishing inaccurate particulars of income.

Analysis:
The appeal was against the penalty order under section 271(1)(c) of the Income-tax Act, 1961. The assessee, engaged in trading old and used ship machineries, declared total income of &8377; 10,49,970/-. The Assessing Officer disallowed a loss of &8377; 2,07,551/- claimed in the P & L account, adding a penalty of &8377; 3,750/-, resulting in total addition of &8377; 2,11,301/-. The penalty was imposed for willful concealment of income and furnishing inaccurate particulars by not adding back the loss on sale of fixed asset. The CIT(A) confirmed the penalty, stating that the assessee furnished inaccurate particulars of income, rejecting the plea of inadvertent mistake. The Tribunal noted that the loss was shown in audited accounts, and the assessee, a regular taxpayer, accepted the mistake during assessment. Citing a Supreme Court case, the Tribunal held that the penalty was not justified, as the error was inadvertent and not an attempt to conceal income or furnish inaccurate particulars. Consequently, the penalty was quashed, and the appeal was allowed.

This case revolved around whether the assessee should be penalized under section 271(1)(c) for concealing income or furnishing inaccurate particulars. The Assessing Officer imposed a penalty due to the assessee's failure to add back a disallowed loss on sale of fixed asset to the total income. The CIT(A) upheld the penalty, emphasizing that the error was not inadvertent. However, the Tribunal, considering the facts and the assessee's regular compliance, found the penalty unjustified. Citing a Supreme Court judgment, the Tribunal ruled that the error was inadvertent and did not amount to concealment or furnishing inaccurate particulars. As a result, the penalty was quashed, and the appeal was allowed.