2024 (11) TMI 1112 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance made u/s 43B regarding expenses claimed by the assessee - as argued there was a confusion in the mind of AO about which limb penalty is to be levied - HELD THAT - The disallowance confirmed by this Tribunal is u/s 43B, of the expenditure claimed by the assessee. This disallowance is not due to any concealement of income by the assessee. The assessee had filed all details pertaining to the expenditure claimed by it. However, certain expenditure could be allowed only on actual payment and therefore the disallowance was made u/s 43B of the Act. In respect of the addition on increase in liability, we note that assessee provided details like confirmation regarding the increase in liability. There is no whisper about veracity of the confirmation filed by the assessee before the CIT(A). Merely because the addition has been partly confirmed by the Tribunal cannot be a reason to ipso facto levy penalty. CIT(A) it is discernable that the confirmations filed by the assessee not been verified. Levy of penalty is not a mechanical procedure and has to be issued with lot of checks and balances. Additions sustained by this Tribunal is not a fit case to levy penalty u/s. 271(1)(c) of the Act. Assessee appeal allowed.

Summary

Issues:
Penalty under section 271(1)(c) for concealment of income and inaccurate particulars.

Detailed Analysis:

Issue 1: Concealment of Income
The case involved penalty proceedings under section 271(1)(c) for concealment of income. The Assessing Officer (AO) initiated penalty proceedings after making additions in the assessment order, which were partly confirmed by the Tribunal. The main contention was that the penalty was levied only for concealment, while the initiation of penalty was not clearly mentioned in the notice issued under section 274 of the Act. The Tribunal noted that the penalty was imposed solely for concealment, and the disallowance of expenditure under section 43B was not due to concealment. The Tribunal referred to the decision of the Karnataka High Court emphasizing that willful concealment is an essential element for imposing a penalty under section 271(1)(c). The Tribunal held that the penalty for concealment in this case was not justified, considering the facts and circumstances.

Issue 2: Disallowance of Expenditure and Increase in Liability
The Tribunal confirmed the disallowance of certain expenditure claimed by the assessee under section 43B and partly confirmed the addition on the increase in liability. The assessee had filed all details regarding the expenditure claimed, and confirmations were provided for the increase in liability. However, the confirmations were not verified by the authorities. The Tribunal observed that the levy of penalty is not a mechanical procedure and should involve checks and balances. It held that the additions sustained by the Tribunal were not suitable for imposing a penalty under section 271(1)(c) of the Act. Therefore, the Tribunal allowed the appeal filed by the assessee, concluding that the penalty was not justified in this case.

In conclusion, the Tribunal set aside the penalty imposed for concealment of income and inaccurate particulars, emphasizing the need for willful concealment as a crucial element for penalty under section 271(1)(c). The Tribunal considered the details provided by the assessee and the lack of verification by the authorities in deciding that the penalty was not warranted in this case.