2015 (5) TMI 585 - AT - Income Tax

Penalty u/s 271(1)(C) - disallowance was a case of concealment and that the assessee had furnished in accurate particulars of income - Held that - The assessee valued its closing stock at cost or market value whichever is lower and on that basis adopted the market value of obsolete stock is also not disputed. The revenue authorities were of the view that the cost should have been taken, according to us, was an infirm presumption. The assessee during regular proceedings and in penalty proceedings showed the value & reasonable value of its products. This information and detail was always there with the revenue authorities. In so far as disallowance of items of P&L account are concerned, it is fact that the AO had made the disallowances on ad-hoc basis, because the assessee could not provide necessary details.No doubt the assessee could not provide the necessary details, but the fact remains that these expenses were routine administration expenses. The assessee is not a proprietary concern, where one can think of disallowances made on personal use. In such a circumstance, penalty is not exigible. Thus penalty is not exigible. - Decided in favour of assessee. Penalty u/s 271(1)(C) - disallowance the payment of office Rent - Held that - Before us, except for making submissions that the CA firm Todarwal & Todarwal had made the submissions. This according to us does not serve any purpose. Unless the assessee is able to fully substantiate from his records, which are worth consideration with, the evidence, the query of the AO/ revenue authorities remain uncomplied with and getting and expecting a relief is a happy presumption by the assessee. Since, even before us the assessee was unable to bring anything worth the salt to substantiate the expenses, we do not intend to interfere with the order of the CIT(A), which we sustain. - Decided against assessee.

Summary

Issues Involved:
1. Whether the CIT(A) erred in not accepting the request for further time.
2. Whether the CIT(A) failed to appreciate the case laws cited by the assessee.
3. Whether the CIT(A) erred in confirming the penalty under Section 271(1)(c) of the Income Tax Act, 1961.
4. Whether the disallowance was a case of concealment and furnishing inaccurate particulars of income.
5. Whether the penalty under Section 271(1)(c) should be deleted.

Issue-wise Detailed Analysis:

1. Request for Further Time:
The assessee argued that the CIT(A) erred in recording that no request for further time was made, despite a letter sent by the assessee's Chartered Accountant on 09th April 2012. This claim was made in both assessment years 1998-99 and 2002-03. However, the Tribunal did not specifically address this procedural issue in its judgment, focusing instead on the substantive issues of penalty and disallowance.

2. Appreciation of Case Laws:
The assessee contended that the CIT(A) failed to appreciate various case laws cited in their submissions. This issue was raised in both assessment years. The Tribunal did not delve into this argument in detail, instead concentrating on the merits of the disallowance and penalty.

3. Confirmation of Penalty under Section 271(1)(c):
In assessment year 1998-99, the CIT(A) confirmed the penalty of Rs. 2,95,989/- under Section 271(1)(c), which the assessee challenged. The Tribunal found that the disallowances made by the AO were on an ad-hoc basis due to the assessee's inability to provide necessary details. However, these were routine administrative expenses, and the Tribunal opined that penalty was not exigible.

In assessment year 2002-03, the CIT(A) confirmed the penalty of Rs. 1,80,375/- under Section 271(1)(c). The Tribunal noted the discrepancies in the assessee's claims regarding office rent and repairs, which were not substantiated with cogent evidence. Consequently, the Tribunal upheld the CIT(A)'s order sustaining the penalty.

4. Disallowance as Concealment and Furnishing Inaccurate Particulars:
For assessment year 1998-99, the Tribunal noted that the assessee had valued its closing stock at market value, which was reasonable and not disputed. The disallowances were made on an ad-hoc basis due to lack of details, but these were routine expenses and did not warrant penalty for concealment or inaccurate particulars.

For assessment year 2002-03, the Tribunal observed that the assessee failed to substantiate the office rent and repair expenses, leading to the conclusion that the payments were devised to inflate expenses and reduce profit. The Tribunal agreed with the CIT(A) that the assessee had not provided sufficient evidence to prove the genuineness of these expenses, thus justifying the penalty.

5. Deletion of Penalty under Section 271(1)(c):
In assessment year 1998-99, the Tribunal directed the AO to delete the penalty, as the disallowances were routine administrative expenses and the assessee had not concealed income or furnished inaccurate particulars.

In assessment year 2002-03, the Tribunal dismissed the appeal, upholding the CIT(A)'s order sustaining the penalty, as the assessee failed to substantiate the expenses with credible evidence.

Conclusion:
- Assessment Year 1998-99: The Tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the AO to delete the penalty.
- Assessment Year 2002-03: The Tribunal dismissed the appeal, upholding the CIT(A)'s order sustaining the penalty.

Order Pronounced: The judgment was pronounced in the open court on 21st April, 2015.