2020 (7) TMI 176 - AT - Income Tax

Penalty u/s. 271(1)(c) - deduction on expenditures - HELD THAT - All the facts were disclosed and the claim was made for deduction on expenditures incurred by the assessee. As per record the assessee has made a bona-fide claim. AO as well as CIT(A) have not challenged the genuineness / bona-fides of the expenditures so incurred. The claim of the assessee is also supported by various decisions and documentary evidences placed on the record. Thus, penalty cannot be levied where a bona-fide claim of the assessee was rejected by the tax department. We observe that the instant case of the assessee is akin to the decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers (P) Ltd vs. CIT 2012 (9) TMI 775 - SUPREME COURT . In that case, the crux of the issue for consideration was whether there was a bona fide and inadvertent error on the part of the assessee, warranting no imposition of penalty u/s 271(1)(C). We are of the opinion that it is not a fit case for levy of penalty u/s.271(1)(C) of the Act. Hence, we set aside the order of the Ld. CIT(Appeal) and direct the Assessing Officer to delete the penalty from the hands of the assessee. Appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Detailed Analysis:
1. The appeal pertains to the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2013-14. The crux of the matter revolves around the penalty levied by the Assessing Officer and upheld by the Ld. CIT(Appeal).

2. The assessee, engaged in a proprietor business of running a petrol and diesel pump, filed the return of income declaring total income and agricultural income. During assessment proceedings, certain additions were made by the Assessing Officer, including non-substantiation of repair and collection charges, excess depreciation claimed on tourist buses, and wrong deduction claimed on housing loan interest.

3. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act based on the additions made during assessment. The penalty was imposed as it was deemed that if the case had not been selected for scrutiny, the income would have escaped taxation.

4. The Ld. CIT(Appeal) confirmed the penalty, leading to the appeal before the Appellate Tribunal. During the proceedings, it was noted that the expenses incurred by the assessee were genuine, and the Revenue did not question their authenticity.

5. The Tribunal observed that the assessee had made bona fide claims for the expenditures, and there was no challenge to the genuineness of the expenses incurred. Citing relevant case laws, including Price Waterhouse Coopers (P) Ltd vs. CIT, the Tribunal highlighted that inadvertent errors, even by reputable firms, do not necessarily indicate concealment of income or furnishing inaccurate particulars.

6. Referring to the decision in CIT vs. Somany Evergree Knits Ltd., the Tribunal emphasized that a bonafide and inadvertent mistake, such as incorrect calculation by a Chartered Accountant, does not amount to furnishing inaccurate particulars of income. The Tribunal concluded that in the present case, there was no justification for the imposition of the penalty under section 271(1)(c) of the Act.

7. Consequently, the Tribunal set aside the order of the Ld. CIT(Appeal) and directed the Assessing Officer to delete the penalty imposed on the assessee. The appeal of the assessee was allowed, and the order was pronounced on July 6th, 2020.