2016 (2) TMI 166 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made u/s 41(1)(a) - Held that - There was no cessation of trading liability during the year and the assessee had even denied the difference in its books of accounts and the reasons of difference were explained through reconciliation and also filed the copies of the bills of the said party and details of vouchers qua payments made. In our opinion the case of the assessee is squarely covered by decision of COMMISSIONER OF INCOME TAX Versus BHOGILAL RAMJIBHAI ATARA 2014 (2) TMI 794 - GUJARAT HIGH COURT and we respectfully following the same decision delete the penalty levied by the AO by allowing the appeal of the assessee - Decided in favour of assessee

Summary

Issues:
Confirmation of penalty u/s 271(1)(c) for addition made u/s 41(1)(a) - Difference in accounts leading to cessation of liability - Concealment of income or difference of opinion.

Analysis:
The appellant challenged the penalty imposed under section 271(1)(c) for the addition made under section 41(1)(a) due to a difference in accounts resulting in the cessation of liability. The Assessing Officer (AO) added Rs. 1,24,170 to the appellant's income, alleging concealment of income by overstating liability. The CIT(A) upheld the penalty, emphasizing the detection of the discrepancy by the AO and confirming the addition as income. The appellant argued that the discrepancy was due to errors in the creditor's books, not concealment, and cited a Gujarat High Court case supporting their position. The Tribunal noted the discrepancy, the AO's rationale, and the appellant's explanations, including reconciliation statements, bills, and payment vouchers. It concluded that this was a difference of opinion, not concealment, aligning with the Gujarat High Court precedent. Consequently, the penalty was deemed unjustified, and the appeal was allowed, overturning the penalty imposed by the AO.

Conclusion:
The Tribunal's decision highlighted the importance of distinguishing between concealment of income and differences of opinion in tax assessments. By analyzing the facts, explanations, and legal precedents, the Tribunal concluded that the penalty under section 271(1)(c) was unwarranted in this case. The judgment underscored the need for thorough examination of discrepancies and adherence to legal standards when imposing penalties for alleged income concealment.