2016 (12) TMI 1143 - AT - Income Tax

Penalty u/s 271(1)(c) - income offered to tax during the quantum assessment - Held that - The due taxes along with applicable interest were paid to the Revenue and assessment order in quantum was accepted by the assessee and no appeal was filed by the assessee before learned CIT(A) against quantum assessment order. On being asked by the authorities below, the assessee has submitted that it is inadvertent mistake/ommision and the assessee was under a bonafide belief that tax having deducted at source , and hence there was no need to show the same in the return of income filed with the Revenue. In our considered view based on peculiar facts of the case, the assessee has committed the mistake inadvertently for which explanation has been given by the assessee before the authorities below which is a bonafide explanation. The assessee filed revised computation of income before the AO including the above income during the assessment proceedings and claimed the tax deducted at source on these two income and paid the differential due taxes to the Revenue along with applicable interest. The assessee has come forward with bonafide explanation and therefore the penalty u/s 271(1)(c) of the Act levied by the A.O. on the assessee is not justified and is hereby ordered to be deleted as the case is covered by explanation 1 to Section 271(1)(c) of the Act. - Decided in favour of assessee

Summary

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

Analysis:
1. The appeal was filed against the penalty order dated 31st July, 2013, passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed due to the assessee's failure to declare certain income in the return filed with the Revenue.
2. The grounds of appeal raised by the assessee included contentions regarding the quantum of penalty imposed and the alleged tax evasion amount. The assessee argued that the penalty was upheld without proper consideration of all grounds and without a genuine hearing.
3. During the hearing, the assessee did not appear, and the appeal was disposed of after hearing only the learned Departmental Representative (D.R.).
4. The Assessing Officer observed discrepancies in the income declared by the assessee, including interest income and salary income not reported accurately. The AO added the undisclosed income to the total income, leading to the penalty imposition under section 271(1)(c) of the Act.
5. The assessee, in response, explained that the omission of certain income was inadvertent and submitted revised computations during the assessment proceedings. However, the AO rejected the explanations and imposed the penalty.
6. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the explanations provided by the assessee were not sufficient to justify the non-disclosure of income. The CIT(A) emphasized that revised computations submitted after scrutiny did not absolve the assessee from penalty.
7. The Tribunal, upon review, found that the assessee had inadvertently omitted to declare certain income and claimed that the non-disclosure was due to a genuine belief that the tax had been correctly deducted at source. The Tribunal accepted the assessee's explanations as bona fide and ordered the deletion of the penalty under section 271(1)(c) of the Act.
8. The Tribunal's decision was based on the assessee's prompt rectification of the non-disclosed income, payment of due taxes, and the genuine belief regarding tax deductions. The Tribunal concluded that the penalty imposition by the AO was not justified in this case, as it fell under the purview of explanation 1 to Section 271(1)(c) of the Act.
9. Consequently, the Tribunal allowed the appeal filed by the assessee for the assessment year 2010-11, and the penalty under section 271(1)(c) was ordered to be deleted.

This detailed analysis highlights the issues involved in the legal judgment regarding the penalty under section 271(1)(c) of the Income Tax Act, 1961, and the subsequent proceedings leading to the deletion of the penalty by the Tribunal based on the assessee's explanations and rectifications.