2019 (4) TMI 1600 - AT - Income Tax

Penalty u/s 271(1)(c) - bonafide mistake committed by the assessee in declaring less income in the return - additional income offered by the assessee voluntarily in response to the notice received u/s 143(2) - two balance sheets and trading and profit and loss accounts were submitted by the assessee - HELD THAT - As rightly contended by the assessee, there is nothing on record to indicate that this additional income was offered by the assessee as a result of any investigation or detection made by the AO and since the addition was made by the AO on the basis of the financial statements prepared and furnished by the assessee, we find merit in the contention of assessee that the additional income was offered by the assessee voluntarily to rectify the bonafide mistake committed inadvertently. We are of the view that the assessee cannot be said to have concealed particulars of his income or furnished inaccurate particulars of such income so as to attract the penal provision of section 271(1)(c) of the Act. In that view of the matter, we cancel the penalty imposed by the AO u/s 271(1)(c) and confirmed by the Ld. CIT(A) and allow this appeal of the assessee.

Summary

Issues:
Penalty under section 271(1)(c) for alleged concealment of income.

Analysis:
The judgment revolves around the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 on the assessee for allegedly concealing income. The assessee, a company engaged in the business of electric supply and contracting, filed a return declaring a total income of ?4,44,860/-. Discrepancies arose when the AO found a difference of ?3,51,483/- between the declared income and the income revealed during assessment proceedings.

The AO considered this difference as concealed income and imposed the penalty. The assessee contended that the additional income was voluntarily disclosed in response to a notice under section 143(2) and was not a deliberate attempt to conceal income. The Commissioner of Income Tax (Appeals) upheld the penalty, stating that the assessee had indeed concealed income that would not have been revealed without scrutiny.

The Tribunal, after considering submissions from both parties, noted that the additional income was offered voluntarily by the assessee to rectify an inadvertent mistake in the initial declaration. The Tribunal found that the income was disclosed based on the financial statements provided by the assessee and not due to detection by the AO. Therefore, the Tribunal concluded that the assessee did not conceal income or provide inaccurate particulars to attract the penalty under section 271(1)(c).

Consequently, the Tribunal canceled the penalty imposed by the AO and upheld by the Commissioner of Income Tax (Appeals), allowing the appeal of the assessee. The judgment highlights the importance of voluntary disclosure, inadvertent errors, and the significance of the source of additional income in determining the applicability of penalties for concealment of income under tax laws.