2020 (11) TMI 643 - AT - Income Tax

Penalty u/s 271(1)(c) - Disallowing 25% of the foreign travel expenses - assessee submitted that one of the director and advisor travelled abroad to expand its business and incurred the above said expenditure - STT charges addition - as argued assessee has made genuine mistake inadvertently - HELD THAT - We notice that assessee has debited the audit fees after making payment directly to legal and professional fees after deducting proper TDS. The assessee once again passed a journal entry for audit fee to be payable and debited the same in auditors remuneration account. The assessee has not noticed this mistake until the mistake was pointed out by the assessing officer in the assessment proceedings, when this mistake was pointed out by the assessing officer, the assessee accepted the mistake. The same was rectified in the books and respective entries was passed in the subsequent assessment year. The details for the same is placed on record, be noted that this mistake was not detected by the assessee since it has debited the same expenditure in 2 different Ledger accounts. As the mistake was pointed out and the assessee has reversed the whole provisions made by the assessee at the year end 31.03. 2008 to the extent of ₹ 6,06,680/-. In our view this type of mistakes is possible while making provisional entries at the year end. With regards to STT claim also, the assessee has failed to disallow the same in computation statement and this mistake is out of oversight. Considering the total income declared by the assessee, we do not see any reason that assessee would indulge in concealing the income by furnishing inaccurate particulars to the extent of expenditure/income disallowed by the AO and the case of the assessee is similar to the case of Price Waterhouse 2012 (9) TMI 775 - SUPREME COURT . Therefore we are inclined to accept the contention of the assessee and delete the penalty levied by the assessing officer. - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of foreign travel expenses.
2. Double entry of auditor's remuneration.
3. Disallowance of Securities Transaction Tax (STT).
4. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Foreign Travel Expenses:
The assessee incurred foreign travel expenses for business expansion but was unable to produce complete documentation. The Assessing Officer (AO) disallowed 25% of these expenses on an ad hoc basis. The Ld. CIT(A) deleted the penalty on this disallowance, noting it was made on an estimated basis and thus did not warrant a penalty.

2. Double Entry of Auditor's Remuneration:
The assessee paid ?1,23,596 to the auditor, which was debited to legal and professional fees. A second entry was mistakenly passed, debiting the auditor’s remuneration account. This error was realized and corrected in the subsequent financial year. The AO imposed a penalty, which the Ld. CIT(A) upheld, but the assessee argued this was a genuine mistake without intent to evade tax.

3. Disallowance of Securities Transaction Tax (STT):
The assessee failed to disallow STT charges of ?27,825 in the computation of total income. This oversight was acknowledged by the assessee, who requested the AO to disallow the amount during assessment. The AO imposed a penalty, upheld by the Ld. CIT(A), but the assessee contended it was an inadvertent error.

4. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The AO initiated penalty proceedings under section 271(1)(c) for concealing income and furnishing inaccurate particulars. The assessee argued that the errors were genuine mistakes, citing several judicial precedents to support their case. The AO relied on cases like UOI vs. Dharmendra Textile Processors and Zoom Communication (P) Ltd. to justify the penalty.

Tribunal’s Findings:
The Tribunal considered the rival submissions and the material on record. It noted that the mistakes were genuine and not detected by the assessee until pointed out by the AO. The Tribunal found similarities with the case of Price Waterhouse Coopers (P.) Ltd. vs. CIT, where the Supreme Court held that genuine errors should not attract penalties. The Tribunal concluded that the assessee did not intend to conceal income or furnish inaccurate particulars and thus deleted the penalty.

Final Judgment:
The appeal filed by the assessee was allowed, and the penalty levied by the AO was deleted. The Tribunal also addressed the procedural issue of pronouncing the order beyond 90 days due to the COVID-19 lockdown, citing relevant judicial precedents to justify the delay.

Pronouncement:
The order was pronounced on 08.07.2020, following Rule 34(5) of ITAT Rules, and by placing the pronouncement list on the notice board.