2016 (9) TMI 800 - AT - Income Tax

Penalty under section 271(1)(c) - difference of opinion about the recognisation of income or expenditure - Held that - AO did not find any factual inaccuracy in the details of the assessee. The only difference in the stand of the assessee and the AO was a difference of opinion about the recognisation of income or expenditure. The assessee has been accounting the expenditure on mercantile basis and recognizing the income on cash basis. Such type of method is not permissible in law, but it was not case of the AO that this method was adopted by the assessee with deliberate attempt to conceal certain things. The assessee has pointed out that under bona fide mistake, it might have been done, and the explanation of the assessee was not found to be false, therefore, allow the appeal assessee and delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Penalty imposition under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Analysis:

The case involved an appeal before the Tribunal against the order of the CIT(A) confirming a penalty imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961. The AO had disallowed certain expenses and imposed a penalty of ?3,47,727 on the assessee for furnishing inaccurate particulars of income. The AO observed that the assessee had followed a mix accounting system, which was not permissible under section 145 of the Income Tax Act. The AO made additions to the income based on these discrepancies. The penalty was imposed after the assessee failed to provide TDS details and explanations for certain expenses.

The assessee contended that the penalty was imposed for concealing income rather than furnishing inaccurate particulars. The Tribunal noted that the penalty was indeed imposed for furnishing inaccurate particulars, not for concealment of income. The AO found that the assessee had attempted to evade tax by providing inaccurate particulars, leading to the concealment of income. The Tribunal dismissed the argument that there was confusion regarding the nature of the penalty.

The Tribunal further considered whether the explanation provided by the assessee was false or made in good faith. It was argued that the discrepancies in accounting methods were not deliberate attempts to conceal income but rather a lapse under section 145(1) of the Income Tax Act. The Tribunal found that there was no deliberate attempt to conceal income, and the explanation provided was not false. Therefore, the penalty was deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal held that the penalty under section 271(1)(c) could only be imposed if the assessee concealed income or furnished inaccurate particulars. In this case, as there was no deliberate attempt to conceal income and the explanation provided was not false, the penalty was deleted. The Tribunal emphasized the importance of distinguishing between deliberate concealment and inadvertent errors in accounting practices.