2017 (5) TMI 1419 - AT - Income Tax

Penalty u/s 271(1)(c) - suppression in closing stock - Held that - In the present case the AO has not collected any incriminating material against the assessee with regard to the closing stock of shares of Apollo Tyres valuing 60, 58, 065/- . The disclosure was made by the assessee through revised computation of income vide letter dated 8/8/06 and not under the constraint of exposure to adverse action by the AO. It is thus the case where disclosure has been made voluntarily and out of free will but not under compulsion. Taking the entire gamut of the case into account we note that there was no case for the AO that the explanation offered by the assessee was not bona fide or there was a concealment. It is repeatedly held by the Courts that the penalty on the ground of concealment of particulars or non-disclosure of full particulars can be levied only when in the accounts/ return an item has been suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clearly disclosed in the return of income penalty cannot be levied and merely because an amount is not allowed or taxed to income it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Further conscious concealment is necessary. Even if some deduction or benefit is claimed by the assessee wrongly but bonafide and no malafide can be attributed the penalty would not be levied. As argued that not filing correct return of income is equal to filing incorrect return of income and therefore the assessee can be said to be guilty of filing inaccurate particulars of income but for levy of penalty u/s. 271(1)(c) this status is not sufficient. The AO has to show by some positive material with which he can compare that what was filed by the assessee was inaccurate or was false leading to the inference that the assessee has concealed income or filed inaccurate particulars of income. Mere disallowance or not accepting the claim of the assessee will not be sufficient. The assessee had disclosed all material facts it is held that there is no case of concealment or furnishing of inaccurate particulars of its income in respect of the disallowances. In view of above we note that the case law relied upon by Ld. DR in the case of Mak Data (P) Ltd. vs. CIT-II (Sura) is relating to voluntary disclosure and hence distinguished to the facts and circumstances of the present case. In view of the above we are of the considered opinion that Ld. CIT(A) has rightly held that the AO was not justified in levying penalty u/s. 271(1)(C) in respect of the said disallowances. Accordingly the same was rightly cancelled which does not need any interference on our part hence we uphold the action of the Ld. CIT(A) in deleting the penalty in dispute and reject the ground raised by the assessee. - Decided in favour of assessee.

Summary

Issues Involved:

1. Whether the order of the Ld. CIT(A) is erroneous and contrary to facts and law.
2. Whether the Ld. CIT(A) erred in deleting the penalty of ?19,00,000/- levied under section 271(1)(c) of the I.T. Act.
3. Whether the assessee filed inaccurate particulars of its income by suppressing the closing stock and not disallowing any expense on account of exempt income.

Detailed Analysis:

1. Erroneous and Contrary to Facts and Law:

The Revenue contended that the order passed by the Ld. CIT(A) was erroneous and contrary to the facts and law. The Tribunal examined the facts and circumstances of the case, including the assessment proceedings and the voluntary disclosure made by the assessee. The Tribunal found that the Ld. CIT(A) had elaborately discussed the issues in dispute and adjudicated them appropriately. The Tribunal upheld the findings of the Ld. CIT(A) that the voluntary disclosure made by the assessee was bona fide and not under compulsion.

2. Deletion of Penalty Levied under Section 271(1)(c):

The Revenue argued that the Ld. CIT(A) erred in deleting the penalty of ?19,00,000/- levied under section 271(1)(c) of the I.T. Act. The Tribunal noted that the penalty was levied by the AO in respect of the addition/disallowances amounting to ?62,11,255/-. The Ld. CIT(A) had deleted the penalty on the grounds that the disclosure made by the assessee was voluntary and out of free will, and there was no concealment or furnishing of inaccurate particulars of income. The Tribunal agreed with the Ld. CIT(A) and held that the penalty was rightly deleted.

3. Filing Inaccurate Particulars of Income:

The Revenue contended that the assessee filed inaccurate particulars of its income by suppressing the closing stock and not disallowing any expense on account of exempt income. The Tribunal examined the findings of the AO and the explanations provided by the assessee. The Tribunal noted that the AO had not collected any incriminating material against the assessee with regard to the closing stock of shares of Apollo Tyres valuing ?60,58,065/-. The disclosure was made by the assessee through revised computation of income and not under the constraint of exposure to adverse action by the AO. The Tribunal held that the disclosure was voluntary and out of free will, and there was no case for the AO that the explanation offered by the assessee was not bona fide or there was a concealment.

The Tribunal also considered the other four additions and found that the penalty proceedings are distinct and different from assessment proceedings. The findings in the assessment proceedings are not conclusive, and the entire material available should be considered afresh by the AO before imposing penalty under section 271(1)(c) of the Act. The Tribunal held that merely because an addition has been made in the assessment order and confirmed in appeal, levy of penalty is not automatic. The Tribunal concluded that there was no conscious or intentional act of the assessee to conceal or furnish inaccurate particulars of income, and the penalty was rightly deleted by the Ld. CIT(A).

Conclusion:

The Tribunal upheld the order of the Ld. CIT(A) in deleting the penalty of ?19,00,000/- levied under section 271(1)(c) of the I.T. Act and dismissed the appeal of the Revenue. The Tribunal found that the disclosure made by the assessee was voluntary and out of free will, and there was no concealment or furnishing of inaccurate particulars of income. The Tribunal agreed with the Ld. CIT(A) that the AO was not justified in levying the penalty in respect of the disallowances.