2019 (1) TMI 146 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - proof of concealment of income - Held that - A perusal of the assessment order clearly shows that there is allegation that the assessee has willfully concealed particular of income. In fact, the disallowance clearly is one in respect of the amount of ₹ 2,35,56,441/-, which is the claim of expenditure incurred, but it has been moved to work in progress and it has been allowed as expenditure in the immediately succeeding year. The genuineness of the expenses have not been questioned nor disputed. The second issue is in regard to current liabilities in the balance sheet in respect of which the TDS has not been deducted, but TDS deducted in the succeeding year and the payment has been done. Therefore, we cannot say concealment of income on this TDS. In respect of addition of ₹ 27,832/-, it is noticed that the assessee has shown it in its capital account and the assessee has also categorically pointed out in his reply that the mistake was caused on account of the Accountant. Even considering the fact, the assessee has such a large turnover it would be difficult even to assume that the assessee would attempt to conceal or avoid payment of tax on interest income as ₹ 27,832/-. Also the explanation given by the assessee has not been found to be false nor has the explanation be disputed. As relying on RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT and ASHOK PAI VERSUS COMMISSIONER OF INCOME-TAX 2007 (5) TMI 199 - SUPREME COURT it cannot be said that there is concealment of income or furnishing of inaccurate particulars of income, which can give cause for levy of penalty u/s.271(1)(c) - decided in favour of assessee

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Alleged concealment of income or furnishing inaccurate particulars of income.
3. Treatment of expenditure and work-in-progress.
4. Non-deduction of TDS on current liabilities.
5. Omission of interest income from taxable income.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in this case was whether the penalty under Section 271(1)(c) of the Income Tax Act, 1961, was rightly levied on the assessee. The assessee contended that there was no willful concealment of income or furnishing of inaccurate particulars of income. The Tribunal noted that the genuineness of the expenses was not disputed by the Assessing Officer and that the expenses were allowed in the subsequent assessment year when the projects were completed. The Tribunal referred to the Supreme Court's decisions in Ashok Pai (T) Vs. CIT and CIT vs. Reliance Petro Products P. Ltd., emphasizing that the element of mens rea was essential for imposing penalty under Section 271(1)(c). Therefore, the Tribunal concluded that the penalty was not leviable in this case.

2. Alleged Concealment of Income or Furnishing Inaccurate Particulars of Income:
The Tribunal observed that there was no allegation that the assessee had willfully concealed particulars of income. The disallowance pertained to the expenditure claimed, which was moved to work-in-progress and allowed as an expenditure in the succeeding year. The Tribunal emphasized that the genuineness of the expenses was not questioned or disputed. The Tribunal also noted that the explanation provided by the assessee was not found to be false, nor was it disputed. Consequently, the Tribunal held that there was no concealment of income or furnishing of inaccurate particulars of income.

3. Treatment of Expenditure and Work-in-Progress:
The assessee followed the Completed Contract Method and claimed expenditure for four residential projects. The Assessing Officer shifted the expenditure to work-in-progress, which the assessee accepted. The Tribunal noted that the expenditure was allowed in the subsequent assessment year when the projects were completed. The Tribunal concluded that there was no concealment of income or furnishing of inaccurate particulars of income in this regard.

4. Non-Deduction of TDS on Current Liabilities:
The Tribunal observed that the TDS on current liabilities was deducted in the succeeding year when the payment was made. Therefore, the Tribunal held that there was no concealment of income on this issue.

5. Omission of Interest Income from Taxable Income:
The assessee admitted that the interest income of ?27,832 was omitted due to an oversight and shown in the capital account. The Tribunal noted that the explanation provided by the assessee was not found to be false, and the mistake was attributed to the accountant's inexperience. The Tribunal emphasized that the amount involved was relatively small, and it was unlikely that the assessee would attempt to conceal or avoid payment of tax on such a small amount. Consequently, the Tribunal held that there was no concealment of income or furnishing of inaccurate particulars of income.

Conclusion:
The Tribunal concluded that there was no concealment of income or furnishing of inaccurate particulars of income by the assessee. Therefore, the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, was canceled. The appeal of the assessee was allowed, and the order was pronounced in the open court on 01 January 2019, at Chennai.

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