2019 (1) TMI 800 - HC - Income Tax

Penalty u/s 271(1)(c) - particular claim made by the assessee was due to bonafide oversight or error - Held that - We have no hesitation in accepting the contention of the learned counsel of the Revenue that merely because the assessee surrenders certain income during assessment which is contrary to the claim in the return filed, he automatically gets immunity from penalty. In the decision in the case of MAK Data P Ltd 2013 (11) TMI 14 - SUPREME COURT held that the assessee s contention that the income was offered to tax to by peace by itself would not be an immunity from penalty. As is well settled, the penalty may still not be sustained. Reliance in this respect can be made to the decision of the Supreme Court in the case of Price Warehouse Coopers Pvt Ltd Vs. CIT 2012 (9) TMI 775 - SUPREME COURT . It was well settled that every wrong claim or a claim which has been rejected during the assessment would not automatically result into penalty proceedings. In the present case, the Commissioner (Appeals) and the Tribunal concurrently held that the claims of the assessee which were withdrawn during the assessment itself was a pure mistake and oversight. The appeal is dismissed.

Summary

Issues involved:
1. Whether the Tribunal was justified in upholding the deletion of penalty under Section 271(1)(c) for excess VRS payment claim.
2. Whether the Tribunal was justified in upholding the deletion of penalty under Section 271(1)(c) for prior period expenses and income claims.
3. Whether the Tribunal was justified in deleting the penalty under Section 271(1)(c) based on the Tax Audit Report.

Issue 1: Excess VRS Payment Claim Penalty
The appeal dealt with the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for an excess claim of ?131.50 lacs made by the assessee on account of VRS payment. The Commissioner (Appeals) and the Tribunal both deleted the penalty, leading to the Revenue's appeal. The Tribunal held that the claims made by the assessee were due to mistake and not deliberate concealment of income. The assessee had agreed to offer the amount to tax during the assessment proceedings, indicating a lack of intent to evade tax. The court emphasized that withdrawing a claim during assessment does not automatically grant immunity from penalty, citing relevant case law. However, if a claim was made due to a genuine mistake or oversight, penalty may not be imposed. In this case, the Commissioner (Appeals) and the Tribunal found that the excess claim was a genuine mistake, leading to the dismissal of the appeal.

Issue 2: Prior Period Expenses and Income Claim Penalty
Regarding the penalty under Section 271(1)(c) for claims of prior period expenses of ?2,59,89,175 and prior period income of ?4,32,398, the Tribunal upheld the deletion of the penalty. The Commissioner (Appeals) and the Tribunal agreed that these claims were also made inadvertently and not with the intention to conceal income. The assessee's willingness to rectify these claims during assessment proceedings indicated a lack of fraudulent intent. The court reiterated that withdrawing a claim during assessment does not automatically absolve one from penalty, but the nature of the claim and the circumstances are crucial in determining penalty imposition. In this case, the Tribunal found that the prior period claims were genuine mistakes, leading to the penalty deletion.

Issue 3: Penalty Deletion Based on Tax Audit Report
The Tribunal also deleted the penalty under Section 271(1)(c) based on the Tax Audit Report, stating that the disallowances made did not amount to furnishing inaccurate particulars or concealing income. The Revenue contended that withdrawing claims during assessment should not grant immunity from penalty, citing relevant case law. The court acknowledged that offering income for tax during assessment does not automatically exempt one from penalty. However, the key consideration is whether the claim was made due to a bona fide oversight or error. In this case, the Commissioner (Appeals) and the Tribunal found that the claims withdrawn during assessment were genuine mistakes and not deliberate attempts to evade tax, leading to the penalty deletion.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalties under Section 271(1)(c) for various claims, emphasizing that the nature of the claims, the intent behind them, and the circumstances surrounding their withdrawal during assessment are crucial in determining the imposition of penalties for tax evasion.