1983 (10) TMI 69 - AT - Income Tax

Summary

Issues:
- Challenge of penalty deletion under section 271(1)(c) of the Act by the revenue.
- Disallowance of bad debt claim.
- Whether the omission to disallow income-tax was due to oversight or concealment.

Analysis:
1. The appeal pertains to the challenge by the revenue against the deletion of a penalty of Rs. 10,102 imposed by the ITO under section 271(1)(c) of the Act for the assessment year 1975-76. The assessee initially disclosed a total income of Rs. 54,394, which was later determined by the ITO to be Rs. 83,854. The ITO found that the assessee had concealed income by failing to disallow payment of income-tax of Rs. 10,102 debited to the Vatav account, leading to the penalty imposition.

2. The matter was taken to the AAC by the assessee, challenging the disallowance related to bad debt. The AAC allowed the claim regarding bad debt disallowance.

3. During penalty proceedings, the ITO rejected the assessee's explanation that the failure to disallow income-tax was an oversight by the accountant. The ITO imposed the penalty, stating that the assessee should have been vigilant while filing the return and that the claim of a bona fide mistake was not acceptable.

4. The assessee appealed to the AAC, providing affidavits from the partner and accountant to prove the genuine mistake in not disallowing the income-tax payment. The AAC held that the omission was bona fide and canceled the penalty.

5. The revenue appealed the AAC's decision, arguing that the assessee should have correctly filed the return, emphasizing that income tax payment is not an allowable business expenditure. The assessee's counsel contended that the mistake was due to confusion caused by maintaining two accounts of the same name.

6. The Tribunal considered the submissions and affidavits, noting the confusion arising from the maintenance of two accounts with the same name. The Tribunal accepted the assessee's explanation, ruling that the omission was due to a genuine mistake and not deliberate concealment. The Tribunal upheld the AAC's decision to cancel the penalty.

7. Ultimately, the appeal was dismissed, affirming the decision to cancel the penalty based on the genuine mistake in not disallowing the income-tax payment.