2016 (8) TMI 318 - AT - Income Tax

Penalty u/s 271(1)(c) - difference in purchases - Held that - The fate of the quantum assessment proceedings is not before us but even in the penalty proceedings u/s 271(1)(c) of the Act, if the fact-situation establishes non-maintainability of a particular addition, then, to the extent of the levy of penalty, the same can be considered appropriately. In the present case, we find that the explanation of the assessee was very much before the lower authorities and, in fact, assessee had moved an application seeking rectification of mistake u/s 154 of the Act and there is no material on record to negate the assertions put forth by the assessee. Therefore, in view of the fact-situation canvassed by the assessee, we deem it fit and proper to hold that no penalty u/s 271(1)(c) of the Act is leviable with respect to a sum on account of difference in purchases, as such addition is itself unsustainable. However, as fairly put-forth by the learned representative for the assessee, the un-reconciled balance of purchases to the extent of ₹ 75,302/- would be exigible to penalty u/s 271(1)(c) of the Act. Thus, on this aspect the Assessing Officer is directed to rework the amount of penalty u/s 271(1)(c) of the Act. Disallowances of balances written off - Held that - Disallowances relates to amounts written-off by the assessee which are capital in nature. No doubt, the claim of such write-off is not tenable in the eyes of law but we find that the relevant discussion in the assessment order does not reflect any filing of inaccurate particulars or concealment by the assessee. A mere non-acceptance of a claim made in the return of income by itself does not justify the penal provisions of Sec. 271(1)(c) of the Act. As a consequence, we set-aside the order of CIT(A) on this aspect and direct the Assessing Officer to delete the levy of penalty with respect to the aforesaid addition. Dividend earned by the assessee from Saraswat Co-op. Bank - exemption in terms of Sec. 10(34) denied - Held that - Every case of a wrong claim cannot invite penalty u/s 271(1)(c) of the Act, especially in the present case where there is no material to suggest any concealment or furnishing of inaccurate particulars of income. In fact, apart from the fact that the exemption has been denied, the discussion in the assessment order does not reveal that the assessee had filed any particulars of income which were found to be wrong or otherwise false. Therefore, following the ratio of the judgment of the Hon ble Supreme Court in the case of Reliance Petroproducts (P) Ltd, 2010 (3) TMI 80 - SUPREME COURT penalty on this aspect of the addition is also directed to be deleted. Appeal decided partly in favour of assessee

Summary

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act for filing inaccurate particulars and concealment of income.
2. Disallowance of balances written off.
3. Addition of dividend income and its exemption claim.

Detailed Analysis:
1. The appeal was against the order of CIT(A) confirming a penalty under section 271(1)(c) of the Income Tax Act. The appellant, a company engaged in trading and manufacturing of printing inks, had a difference between the returned and assessed loss due to disallowances made by the Assessing Officer. The penalty was imposed for three additions: difference in purchases, disallowance of balances written off, and dividend income from a Co-operative Bank. The appellant argued that the penalty was not justified. The Tribunal found that the addition for the difference in purchases was unsustainable as the discrepancy was minimal after reconciliation. The penalty was upheld only for the remaining un-reconciled balance. The penalty for the disallowance of balances written off was deemed not applicable as the claim, though not accepted, did not amount to concealment. Similarly, the penalty for the dividend income exemption claim was deleted as it was a genuine error without any intent to conceal income.

2. The penalty for the disallowance of balances written off was challenged by the appellant, arguing that the disallowance amount was incorrectly determined. The Tribunal observed that the disallowance related to capital items and a mere non-acceptance of the claim did not warrant a penalty under section 271(1)(c) of the Act. Therefore, the penalty for this addition was set aside, and the Assessing Officer was directed to delete the penalty amount.

3. The third addition subject to penalty was the dividend income claimed as exempt but not meeting the criteria for exemption. The appellant contended that it was an inadvertent error and not intentional concealment. The Tribunal noted that the incorrect exemption claim did not amount to concealment or filing inaccurate particulars. Relying on relevant case law, the penalty for this addition was also directed to be deleted.

In conclusion, the Tribunal partly allowed the appeal, holding that penalties were not justified for the additions related to the difference in purchases, disallowance of balances written off, and dividend income exemption claim. The Tribunal emphasized that non-acceptance of claims or inadvertent errors in filings do not necessarily constitute concealment or inaccuracies warranting penalties under the Income Tax Act.