2017 (2) TMI 806 - AT - Income Tax

Penalty u/s 271(1)(c) - income of management bonus not disclosed in the return of income filed by the assessee - Held that - The entire amount of management bonus was subjected to deduction of tax at source at maximum marginal rate by the employer M/s Fairdeal Multimedia Pvt. Ltd. on behalf of the assessee, and thus the entire due taxes had been deposited to the credit of Central Government albeit by the employer. The ld. D.R. as well the authorities below could not controvert these contentions of the assessee. Considering this no penalty u/s 271(1)(c) of the Act can be levied under these circumstances wherein the assessee has come forward with an bonafide explanation . It is a case of bonafide mistake on the part of the assessee and more so Revenue has got tax deducted at source at maximum marginal rate on the entire management bonus albeit paid by the employer on behalf of the assessee. Thus, penalty levied u/s 271(1)(c) of the Act by the AO and as confirmed by learned CIT(A) is not sustainable keeping in view bonafide explanation offered by the assessee as detailed above - Decided in favour of assessee.

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Non-disclosure of management bonus in the return of income.
3. Bona fide belief and explanation provided by the assessee.

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:
The primary issue in this case is whether the penalty of ?6,58,573/- levied under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income or furnishing inaccurate particulars of income, is justified. The Assessing Officer (AO) levied this penalty on the grounds that the assessee did not disclose the management bonus of ?19,37,552/- in the return of income filed. The CIT(A) confirmed this penalty, holding that the assessee had furnished inaccurate particulars of income by not including the management bonus in the original return.

2. Non-disclosure of Management Bonus in the Return of Income:
During the assessment proceedings under Section 143(3) read with Section 143(2) of the Act, the AO observed that the assessee had credited an amount of ?19,37,552/- as management bonus from Fairdeal Multimedia Pvt. Ltd. in his capital account but did not offer it for taxation. The assessee explained that the bonus was determined based on the audited financials of Fairdeal Multimedia Pvt. Ltd., which were finalized in September 2009. As the bonus was quantified after the due date for filing the return, it was not included in the original return filed belatedly on 26-02-2010 under Section 139(4). The assessee later included this amount in a revised computation of income during the assessment proceedings.

3. Bona Fide Belief and Explanation Provided by the Assessee:
The assessee contended that the omission to include the management bonus in the original return was a bona fide mistake. The bonus was determined and quantified only in September 2009, and the tax was deducted at source by the employer at the maximum marginal rate. The assessee believed that the income should be declared in the subsequent assessment year (2010-11). The Tribunal considered this explanation and the fact that the entire tax on the bonus was already deducted and paid by the employer. The Tribunal found that the assessee’s explanation was bona fide and that no prejudice was caused to the Revenue as the tax was duly deducted at source.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was not sustainable as the assessee had provided a bona fide explanation for the omission, and the Revenue had not suffered any loss since the tax was already deducted at source. The Tribunal ordered the deletion of the penalty of ?6,58,573/-.

Final Order:
The appeal of the assessee was allowed, and the penalty levied under Section 271(1)(c) was deleted. The order was pronounced in the open court on 15th February 2017.

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