2019 (6) TMI 239 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance u/s.40(a)(ia) as assessee failed to deduct TDS - addition of undisclosed sales as reflected in 26AS statement - HELD THAT - In this case, the tax was paid in the year 2012-13 and was claimed as expenses in that year only. We observe that the genuineness of the claim of the assessee has not been disputed by the department. Therefore, it cannot be said that assessee has claimed expenses which are false or not genuine. The assessee has furnished all the relevant facts concerning the claim made by it in the return filed. The AO has levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s.40(a)(ia) as assessee failed to deduct TDS thereon. Undisclosed sales as reflected in Form 26AS - in the case of Berger Paints ltd., said income was accounted for in financial year 2003-04 and in the case of Hindustan Unilever Ltd., the amount was written off as discount and tax was deducted on such amount erroneously. Therefore, in our view, the assessee has explained the above difference in the receipts as per the details submitted before the authorities below and the details noted in 26AS. It is well settled law that quantum and penalty proceedings are independent and distinct proceedings. Even if the addition is agreed by the assessee and if the assessee is able to explain the addition, then, penalty may not be leviable in the facts and circumstances of the case. The explanation of assessee at the penalty stage was factually correct based on the material on record and assessee successfully explained the addition so made which is the basis for levy of the penalty. Since the difference is reconciled and claim of assessee have not been doubted or rejected, therefore, Ld. CIT(A) was not justified in confirming the levy of penalty. We are of the view that since the assessee explained the above addition, therefore, penalty need not be imposed in the facts and circumstances of the case. - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) for non-deduction of tax under section 40(a)(ia) and undisclosed sales.

Analysis:
The appeal pertains to the Assessment Year 2005-06 against an order passed by the CIT(A) and the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer made additions under section 40(a)(ia) and on account of undisclosed sales based on Form 26AS. The CIT(A) partly allowed the appeal but confirmed the additions. The penalty was levied for non-deduction of tax and undisclosed sales. The assessee contended that the additions were procedural and not indicative of concealment of income. The genuineness of the claims was not disputed by the department. The Tribunal observed that the claim disallowance was due to failure in TDS deduction, not due to false claims. The Apex Court's precedent was cited to support the view that disallowed claims do not amount to furnishing inaccurate particulars. The Tribunal found the penalty unjustified and set it aside.

Regarding the penalty for undisclosed sales, the assessee explained the differences in receipts as per 26AS. The Tribunal noted that quantum and penalty proceedings are distinct, and if the assessee can explain the additions, penalty may not be leviable. As the assessee provided a factual explanation supported by records, the penalty was deemed unwarranted. Citing legal precedents and the assessee's explanations, the Tribunal concluded that the penalty for undisclosed sales was not justified and allowed the appeal.

In conclusion, the Tribunal set aside the CIT(A)'s order confirming the penalty under Section 271(1)(c) for both issues. The appeal of the assessee was allowed, emphasizing that the explanations provided were sufficient to negate the imposition of penalties.