2020 (12) TMI 852 - AT - Income Tax

Penalty u/s 271(1)(c) - Undisclosed bank accounts in which contract receipts were deposited - Defective notice - whether, Ld. AO without striking out one of the limb i.e. furnishing of inaccurate particulars of income or concealment of income can levy penalty under section 271(1)(c)? - HELD THAT - Admittedly assessee had not disclosed to bank accounts in which contract receipts were deposited. While passing penalty order, we note that penalty is levied for concealment as there was material on record to show that bank accounts contained undisclosed income of assessee. This fact is discernible from the assessment order. In the assessment order Ld. AO initiated both the limbs, i.e; concealment and filing of inaccurate particulars. We therefore do not agree with the argument advanced by Ld. AR alleging the validity of notice issued under section 274. Assessee filed revised balance sheet after reconciling/explaining the credits in the above said accounts. The assessment order was then passed after verifying all the details by making an addition on account of unaccounted contract receipts amounting to ₹ 7 lakhs. By producing bank accounts, assessee had displaced the presumption that failure to return the correct income had arisen from any fraud or gross or willful neglect. We also note that no specific addition had been made in the assessment order on this account. No discrepancy having noted by Ld. AO in respect of the 2 accounts except for the fact that assessee had not maintained accounts in respect of the 2 bank accounts declared subsequently. We do not find assessee to be liable for concealment under section 271(1)(c) as during assessment proceedings assessee demonstrated his bona fides. Further assessee has also not filed any appeal against the addition made towards such bank accounts. Thus the conduct of assessee deserves the penalty to be deleted. Penalty levied for delay in uploading the audit report within the due date - HELD THAT - There has not been assessee has never been held for such default in the preceding years as noted by Ld. AO. We also note that the reason submitted by assessee for the delay in filing of audit report was due to ill-health during the relevant period. There is nothing on record to prove anything contrary by revenue, to what has been submitted by assessee before authorities below or before us. We do not find the conduct of assessee to be malafide under such circumstances. AO at the time of assessment proceedings had the benefit of audit report and therefore in our view levy of penalty should be liberally construed. We therefore do not find any reason to sustain the present penalty. Accordingly grounds raised by assessee in this appeal stands allowed.

Summary

Issues:
1. Validity of penalty under section 271(1)(c) for concealment of income.
2. Validity of penalty under section 271B for delay in filing audit report.

Issue 1: Validity of penalty under section 271(1)(c) for concealment of income:
The appellant filed appeals against orders passed by Ld. CIT (A) for the assessment year 2014-15. The appellant challenged the penalty imposed under section 271(1)(c) for concealment of income and failure to furnish the audit report within the stipulated time. The Ld. CIT (A) upheld the penalty under section 271(1)(c) after finding that the appellant had not disclosed certain bank accounts containing substantial amounts. The appellant contended that the omission was inadvertent and not deliberate. However, the Ld. CIT (A) considered this explanation as self-serving and confirmed the penalty. The appellant then appealed to the ITAT.

Upon review, the ITAT observed that the appellant had not disclosed certain bank accounts during the assessment, resulting in the addition of income based on estimation. However, the appellant later produced the bank accounts and reconciled the credits, demonstrating good faith during the assessment proceedings. The ITAT noted that no specific addition was made in the assessment order regarding these accounts, and the appellant's conduct did not indicate willful neglect or fraud. Therefore, the ITAT concluded that the penalty for concealment under section 271(1)(c) was unwarranted, and the penalty was deleted.

Issue 2: Validity of penalty under section 271B for delay in filing audit report:
The penalty was imposed on the appellant for delay in uploading the audit report within the due date. The appellant argued that the delay was due to ill health and lack of means to comply with procedures in the village where they resided. The Ld. CIT (A) upheld the penalty, but the appellant appealed to the ITAT. The ITAT considered that the delay was three months and noted that the appellant had not been penalized for similar defaults in previous years. The reason cited for the delay was the appellant's ill health during the relevant period, which was not disputed by the revenue.

The ITAT found no malafide intent on the part of the appellant and considered that the penalty should be viewed leniently, given the circumstances. As the appellant had provided a valid reason for the delay, and there was no evidence to the contrary, the ITAT decided to delete the penalty under section 271B. Consequently, the grounds raised by the appellant in this appeal were allowed, and the appeal was upheld.

In conclusion, the ITAT allowed both appeals filed by the appellant, deleting the penalties imposed under sections 271(1)(c) and 271B.