2019 (5) TMI 105 - AT - Income Tax

Penalty u/s 271(1)(c) - Disallowance of expenses - AO has observed that the assessee has admitted qua a fact that he has furnished inaccurate particulars - HELD THAT - What the assessee has admitted is that, in case the expenses are partly disallowed, then he did not dispute. It could not be construed that the assessee has admitted allegations that he has furnished inaccurate particulars. The AO has nowhere brought any material or reasoning for harbouring this plea. The only question is that, out of total expenditure claimed by the assessee, partly not accepted by the AO. His explanation qua the expenditure was not found to be false. The assessee could not substantiate his claim of expenditure with help of evidence. In these circumstances penalty upon the assessee cannot be imposed with help of Explanation 1 to section 271(1)(c) If the AO was able to demonstrate that the explanation of the expenditure given by the assessee was false, then his case can be appreciated. Penalty is not imposable upon the assessee - Decided in favour of assessee.

Summary

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

Analysis:
The appeal was filed against the penalty imposed by the ld.CIT(A) under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars. The assessee had declared a total income of &8377; 2,83,880/-, showing short term capital gain on the sale of an immovable property. The AO disallowed a portion of the claimed expenditure, leading to a penalty of &8377; 1,02,800/-. The AO initiated penalty proceedings mentioning both concealment of income and furnishing inaccurate particulars in the notice, but the penalty was imposed for furnishing inaccurate particulars. The Tribunal noted that the assessee did not admit to furnishing inaccurate particulars but only accepted the partial disallowance of expenses. The AO failed to provide any evidence or reasoning to support the claim of inaccurate particulars. The Tribunal found that the assessee's explanation for the expenditure was not false, but lacked sufficient evidence. Consequently, the penalty under Explanation 1 to section 271(1)(c) was deemed inapplicable, and the penalty was deleted, allowing the appeal of the assessee.

Conclusion:
The Tribunal, comprising Shri Rajpal Yadav, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member, concluded that the penalty under section 271(1)(c) for furnishing inaccurate particulars was not justified in the absence of evidence proving false explanation by the assessee. The appeal of the assessee was allowed, and the penalty was deleted. The decision was pronounced in the Open Court on 30th April 2019.