2021 (8) TMI 1191 - AT - Income Tax

Penalty u/s.271(1)(c) - computation of income added back the provision for substandard asset for the purpose of sec 115JB - HELD THAT - There is no case that the profit and loss account prepared is not as per law - provision for standard asset is duly reflected in the profit and loss account. It cannot be said that it was not a mistake of the assessee not to add back the same under section 115JB. Once having disclosed the provision for substandard asset which is a normal feature in the preparation of profit and loss account, it will certainly be a mistake not to add the same under the 115JB computation of income. CIT(A) has completely erred in observing that the provision for substandard asset was not disclosed in any of the enclosures of computation of income. CIT(A) has misled himself. Assessee s claim that it was a genuine mistake and the assessee has suo moto revised the same during the assessment proceedings is cogent. The authorities below have not been able to cogently rebut the submission of the assessee - set aside the orders of the authorities below and delete the penalty - Appeal by the assessee stands allowed.

Summary

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

Analysis:
The case involved an appeal against the order confirming the penalty of ?9,52,784 imposed on the assessee for not adding back the provision for standard asset in the computation of income under section 115JB of the Income Tax Act. The assessee initially filed its return of income declaring total income under normal provisions and section 115JB. During scrutiny, it revised the computation to add back the provision for standard asset. The Assessing Officer (A.O.) initiated penalty proceedings for inaccurate particulars of income, which was upheld by the Commissioner of Income Tax (Appeals) (CIT(A)). The A.O. argued that the revision was not purely suo moto but a result of scrutiny assessment, leading to the penalty imposition.

During the penalty proceedings, the A.O. and CIT(A) contended that the assessee's claim of a genuine mistake was unsustainable, as the provision for standard asset was not disclosed in the computation of income. However, the Appellate Tribunal found that the assessee's revision was indeed suo moto, as there was no mention of the issue by the A.O. for 8 months into the scrutiny proceedings. The Tribunal emphasized that the provision for standard asset was reflected in the profit and loss account, indicating compliance with financial reporting requirements. It was deemed a mistake not to add it back in the section 115JB computation. The Tribunal concluded that the CIT(A) erred in rejecting the assessee's claim and deleted the penalty, stating that the authorities failed to rebut the assessee's submission effectively.

In the final decision, the Appellate Tribunal allowed the appeal, setting aside the orders of the lower authorities and deleting the penalty imposed on the assessee.