2013 (8) TMI 72 - AT - Income Tax

Penalty u/s 271(1)(c) - inaccurate particulars of income on account of liability in the name of sundry creditor M/s Shri Ram Udyog - Held that - The assessee has filed copy of the account of M/s Shri Ram Udyog for the assessment year under appeal to show that there was opening credit balance of Rs.94,758.60 as on 01.04.2004. At the end of the year, on 31.03.2005 there is credit balance of Rs.1,20,850/-. The assessee has also filed copy of the balance sheet of the preceding assessment year as on 31.03.2004 in which the credit balance on 31.03.2004 in the name of M/s Shri Ram Udyog is mentioned as Rs.94,758.60. Thus, the aforesaid amount is coming up from the preceding assessment year and was shown as opening balance in the account of the assessee on 01.04.2004. Therefore, not a transaction related to the assessment year under appeal even if the addition is maintained on quantum as was not pressed before CIT(A). Thus, the item which did not pertain to assessment year under appeal and was merely a opening balance in the assessment year under appeal which was coming up from the earlier year, cannot be considered for any purposes for fastening liability upon assessee. The books of account of assessee for preceding assessment year have not been doubted by the Revenue authorities. For opening balance no adverse view could be taken in the assessment year under appeal. The assessee has not failed to offer any explanation and the explanation of the assessee was not found to be false & has made bona-fide explanation based upon the entries in books of account maintained of the earlier years. As decided in M/s Rajasthan Spinning Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA on every demand penalty is not automatic. . Also the case of CIT Vs The Shahabad Coop. Sugar Mills 2009 (10) TMI 154 - PUNJAB & HARYANA HIGH COURT held that making a wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty under section 271(1)(c). Also see CIT Vs. Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein held mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee. Thus penalty should not be imposed against the assessee. In favour of assessee.

Summary

Issues:
Challenging the levy of penalty under Section 271(1)(c) of the Income Tax Act on addition of Rs.94,633.

Analysis:

Issue 1: Challenge against Penalty Levy
The appellant contested the penalty imposed under Section 271(1)(c) of the Income Tax Act regarding the addition of Rs.94,633. The discrepancy arose from a liability shown by the assessee to a creditor, M/s Shri Ram Udyog. The appellant explained that the difference in the accounts was due to an opening balance from the previous year. The appellant argued that the opening balance from the earlier year should not be considered for the current year's addition. The appellant provided documentary evidence to support this claim, including the account details of M/s Shri Ram Udyog and the balance sheet from the preceding assessment year. The appellant's explanation was found to be bona fide and based on the entries in the books of account from earlier years.

Issue 2: Legal Precedents and Arguments
The appellant relied on various legal precedents to support their case, including decisions such as Price Waterhouse Coopers Pvt. Ltd. Vs. CIT and CIT Vs. Reliance Petro Products Pvt. Ltd. These cases emphasized that mere incorrect claims do not warrant penalty under Section 271(1)(c) if the details provided in the return are not found to be false. The appellant argued that the penalty should not be imposed as the discrepancy was related to the opening balance carried forward from previous years and did not pertain to the current assessment year.

Issue 3: Judicial Interpretation and Decision
The Tribunal considered the arguments presented by both parties and analyzed the facts of the case. It was noted that the penalty proceedings were independent of the quantum assessment and required separate consideration. The Tribunal referred to legal judgments, such as the case of M/s Rajasthan Spinning Weaving Mills, to highlight that not every demand warrants an automatic penalty. Additionally, the Tribunal cited the case of CIT Vs. Reliance Petro Products Pvt. Ltd. to emphasize that furnishing inaccurate particulars requires a finding that the details supplied are incorrect or false. In this case, as the discrepancy was attributed to the opening balance from earlier years and the appellant's explanation was deemed genuine, the Tribunal concluded that the penalty should not be imposed.

Conclusion:
After thorough deliberation, the Tribunal ruled in favor of the appellant, setting aside the orders of the lower authorities and canceling the penalty. The Tribunal determined that the penalty was unwarranted in this scenario, considering the nature of the discrepancy and the explanations provided by the appellant based on the entries in the books of account from previous years.