2020 (4) TMI 463 - AT - Income Tax

Penalty u/s 271(1)(c) - additions made on account of disallowance of promotional and advertisement expenses and claim of excess loss on sale of motor car - HELD THAT - As regards advertisement and promotional expenses, it is noticed, the AO himself has stated that such expenditure was incurred by the assessee in the preceding years. It is further evident, only due to increase in the quantum of expenditure the AO has disallowed the expenditure on the allegation that the assessee has failed to furnish any evidence to support such increase in the expenditure. Disallowance is not due to any false claim made by the assessee but on the basis of doubt entertained with regard to the quantum of expenditure - assessee cannot be accused of furnishing inaccurate particulars of income or concealing income Claim of excess loss on account of sale of motor car, it is the claim of the assessee that such excess loss was claimed inadvertently due to ignorance. AR has submitted, during the assessment proceeding the assessee has furnished a working of short term capital loss on sale of motor car and the Assessing Officer has accepted such loss and allowed carry forward of the same - excess claim of loss was because of the fact that the assessee has debited it to his profit and loss account. The explanation of the assessee that, it is a bonafide and inadvertent mistake is acceptable. Therefore, even in respect of this addition also, there cannot be any allegation of either furnishing inaccurate particulars of income or concealment of income. We hold that the imposition of penalty under Section 271(1)(c) in the present case is uncalled for. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under Section 271(1)(c) for inaccurate particulars of income and concealment of income.

Analysis:
The appeal was filed by the assessee against the penalty imposed under Section 271(1)(c) of the Act. The Assessing Officer disallowed certain expenses claimed by the assessee and added back certain losses to the income, leading to the initiation of penalty proceedings. The assessee challenged the penalty order before the First Appellate Authority but was unsuccessful.

The Authorized Representative argued that the penalty order cannot be sustained as the exact charge for initiating penalty proceedings was not specified by the Assessing Officer. Additionally, it was contended that the additions on which the penalty was based were not due to inaccurate particulars or concealment of income but were bonafide claims rejected by the Assessing Officer.

On the other hand, the Departmental Representative supported the penalty imposition, stating that the assessee did not disclose income properly and furnished inaccurate particulars.

After considering the submissions and evidence on record, the Tribunal found that the penalty was imposed based on disallowed expenses and excess loss claimed on the sale of a motor car. The Tribunal noted that the disallowance of expenses was due to doubts regarding the quantum of expenditure, not false claims by the assessee. Regarding the excess loss claim, it was accepted as a bonafide mistake. Therefore, the Tribunal concluded that there was no case of inaccurate particulars or concealment of income by the assessee.

Consequently, the Tribunal held that the penalty under Section 271(1)(c) was unwarranted and deleted the penalty amount imposed. The Tribunal did not address the validity of the penalty order due to its decision on the merit of the case.

In conclusion, the appeal was allowed, and the penalty under Section 271(1)(c) of the Act was deleted. The decision was pronounced in Open Court on 05.01.2020.