2021 (10) TMI 783 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - addition made on account of disallowance under the normal provision of the Income Tax Act - HELD THAT - We have also gone through the judicial pronouncement of Price Waterhouse Coopers (P) Ltd. 2012 (9) TMI 775 - SUPREME COURT wherein held that assessee firm filed its return of income. It was a bonafide and inadvertent error. Assessee was not guilty of either furnishing inaccurate particulars or attempting to conceal its income, imposition of penalty was unjustified - assessee had accounted the provision for interest twice by mistake on which the Assessing Officer has levied penalty for furnishing inaccurate particulars of income. As noticed that assessee itself shown the said expenditure as income in the subsequent assessment year 2009-10 and demonstrated from the copy of return that the same was filed on 30th Sep, 2008 before detecting the discrepancy under scrutiny assessment. Therefore, necessary correction has already been done by the assessee before detecting the mistake pointed out by the Assessing Officer in the assessment proceedings for the year under consideration - We consider that decision of ld. CIT(A) in sustaining the impugned penalty is not justified. Therefore, we direct the Assessing Officer to delete the impugned penalty. Accordingly, this appeal of the assessee is allowed.

Summary

Issues:

1. Penalty under section 271(1)(c) for inaccurate particulars of income.

Detailed Analysis:

Issue 1: Penalty under section 271(1)(c) for inaccurate particulars of income

The case involved an appeal by the assessee against the decision of the CIT(A) confirming the penalty levied under section 271(1)(c) of the Income Tax Act on the addition made due to the disallowance of a certain amount under the normal provisions of the Act. The Assessing Officer had noticed that the assessee had accounted interest expenses twice, leading to their disallowance and addition to the total income of the assessee. The penalty was imposed for furnishing inaccurate particulars of income.

During the appellate proceedings, the assessee explained that the provision for interest was accounted for twice by mistake, and rectification entries were passed in the subsequent year, showing the amount as income. The assessee, a state-owned public sector undertaking, demonstrated that the mistake was rectified before the discrepancy was pointed out by the Assessing Officer. The Tribunal considered judicial pronouncements, including the cases of Reliance Petro-Products Pvt. Ltd. and Price Waterhouse Coopers Pvt. Ltd., which emphasized that the mere disallowance of a claim by the revenue does not automatically attract a penalty under section 271(1)(c).

The Tribunal noted that the assessee had corrected the error before it was detected by the Assessing Officer during the scrutiny assessment for the year under consideration. Based on the facts, findings, and judicial pronouncements, the Tribunal concluded that the imposition of the penalty was not justified. Consequently, the Tribunal directed the Assessing Officer to delete the penalty, allowing the appeal of the assessee.

In conclusion, the Tribunal found in favor of the assessee, highlighting that the rectification of the mistake before detection by the Assessing Officer and the judicial precedents cited supported the decision to delete the penalty under section 271(1)(c) for furnishing inaccurate particulars of income.