2019 (6) TMI 92 - AT - Income Tax

Penalty u/s 271(1)(c) - non deduction of tds - disallowance u/s 40(a)(ia) - bona fide mistake - furnishing inaccurate particulars of income - HELD THAT - From the assessment order itself it is evident that the AO came to know about the non deduction of tax at source on the payment from the tax audit report. The explanation of the assessee for non deduction of tax at source is, due to oversight the assessee could not add back the amount disallowed u/s 40(a)(ia) in the computation of income. In our view, the aforesaid explanation of the assessee appears to be plausible considering the fact that disallowance of the aforesaid amount was suggested by the tax auditor in the audit report. Since the assessee had furnished full particulars about the expenditure incurred including the fact of non deduction of tax at source in the tax audit report itself, it cannot be accused of furnishing inaccurate particulars of income. Therefore, contention of the learned Authorised Representative that failure to disallow the amount u/s 40(a)(ia) was due to a bona fide mistake is acceptable. Therefore, by applying the ratio laid down in Price waterhouse Coopers Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT we delete the penalty imposed - Decided in favour of assessee.

Summary

Issues:
Challenge to penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2014-15.

Analysis:
The appeal was filed challenging the penalty imposed under section 271(1)(c) of the Income Tax Act, amounting to ?55,260 for the assessment year 2014-15. There was a delay of 18 days in filing the appeal, and the assessee sought condonation of the delay, which was granted by the tribunal. The main issue revolved around the disallowance of an amount in the tax audit report under section 40(a)(ia) of the Act, leading to the initiation of penalty proceedings. The Assessing Officer disallowed the amount of ?1,62,563, and subsequently imposed a penalty. The first appellate authority upheld the penalty, leading to the appeal before the tribunal.

The assessee argued that the disallowance was due to an oversight and not furnishing inaccurate particulars of income. The tribunal considered the submissions and found the explanation plausible. It noted that the tax audit report itself highlighted the non-deduction of tax at source, showing full disclosure by the assessee. Relying on legal precedents, including the decision in Pricewaterhouse Coopers Pvt. Ltd., the tribunal concluded that the penalty should be deleted. The tribunal held that the failure to disallow the amount under section 40(a)(ia) was a bona fide mistake and not intentional, hence deleting the penalty imposed.

In conclusion, the tribunal allowed the appeal, deleting the penalty of ?55,260 imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2014-15. The decision was based on the assessee's plausible explanation for the oversight in not adding back the disallowed amount, supported by the full disclosure in the tax audit report. The tribunal's ruling was in line with legal precedents and the principle of bona fide mistake, as established in relevant case laws.