2012 (10) TMI 853 - AT - Income Tax

Penalty u/s 271(1)(c) - non-disclosure of ROC fee and interest expenditure - Held that - The explanation of the assessee that non-disclosure of both the above income was indeed due to inadvertence on the part of the assessee and thus the mistake was bona fide is not so convincing. The assessee has offered tax on the above heads in its revised statements only after selection of the case in scrutiny and after issuance of notice u/s 143(2)/142(1) and after raising the specific queries by the A.O with reference to those expenses claimed by the assessee in the Profit & Loss Account. Thus, no substance in the contention of the assessee that the disclosure of additional income while revising the computation of income was voluntary - the mistakes committed in not disclosing the above additional income in its return of income originally filed, was not bona fide to extend the benefit of Explanation-1 to section 271(1)(c) to the assessee - against assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) for non-disclosure of additional income.

Analysis:
The appellant contested the penalty imposed under section 271(1)(c) by the Assessing Officer for not disclosing additional income. During assessment proceedings, it was found that the authorized capital of the assessee had increased significantly, and expenses were debited for interest on loans borrowed. The assessee submitted that the filing fee on increased authorized share capital and interest on loans were inadvertently omitted from the income statement. The Assessing Officer considered the belated declaration of additional income as an attempt to evade penalties. The Ld. CIT(A) upheld the penalty. The appellant argued that the mistakes were rectified voluntarily during assessment proceedings, citing reliance on various legal decisions.

The appellant's representative emphasized that the errors were unintentional and rectified promptly during scrutiny proceedings. The appellant's directors were not well-versed in tax laws and relied on their counsel for return preparation. The appellant voluntarily rectified the mistakes by revising the income statement. The Ld. AR referred to legal precedents to support the appellant's case.

The Tribunal considered the explanations provided by both parties. It noted that the appellant's non-disclosure of income was not bona fide, as the additional income was declared only after scrutiny and specific queries from the Assessing Officer. The Tribunal found that the appellant's reliance on its Chartered Accountant did not absolve it of the non-disclosure. Citing a Delhi High Court decision, the Tribunal emphasized the importance of bona fide claims and penalties to deter tax evasion. Consequently, the Tribunal upheld the penalty imposed under section 271(1)(c).

In conclusion, the Tribunal dismissed the appellant's appeal, affirming the penalty under section 271(1)(c) for non-disclosure of additional income. The Tribunal found the explanations provided by the appellant insufficient to support a claim of bona fide mistake, considering the timing of the income declaration and the reliance on professional advice during return filing.