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TMI Blog2008 (9) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... n question, the disclosure of the same in its books of account as done by the assessee was sufficient in law. The provisions of s. 271(1)(c) of the Act were not attracted to the cases where income of an assessee is assessed on estimate basis and additions are made therein. It was held that when the additions has been made on the basis of estimate and not on account of any concrete evidence of concealment, penalty was not leviable. In the case of Dilip N. Shroff vs. Jt. CIT [ 2007 (5) TMI 198 - SUPREME COURT] the apex Court considered the scope of levying penalty u/s. 271 (1)(c). In the present case the disallowance u/s. 40A(2)(b) cannot be considered as concealment of income or furnishing inaccurate particulars. Consequently we are of the opinion that the facts of the case does not warrant penalty u/s. 271(1)(c). Therefore, the order of the CIT(A) is set aside. Penalty cancelled. In the result, appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to s. 271(1)(c). 3. The learned counsel submitted that there cannot be any penalty when the amount was disallowed invoking provisions of s. 40A(2)(b). In this case the genuineness of the amount was not doubted. Only the quantum of the amount paid was restricted by the AO invoking the provisions of s. 40A(2)(b). He referred to the order of the AO as well as the order of the CIT(A) to say that the assessee has indeed obtained quotations from the parties and considering the nature of the work and the expertise required the work was assigned to the sister concern for Rs. 63,00,000. It was submitted that the fact that the work was done was not in dispute and the AO restricted the amount on estimation but there was no concealment of any income nor furnishing of any inaccurate particulars. The counsel relied on the decisions in the case of Voltamp Transformers (P) Ltd. vs. CIT (1981) 23 CTR (Guj) 312 : (1981) 129 ITR 105 (Guj), ITO vs. Kumar Metal Industries (1991) 39 TTJ (Bom) 7 : (1991) 36 ITD 261 (Bom) and CIT vs. Shankar Ghosh (1995) 214 ITR 349 (Cal) for the proposition that there is always an estimation involved in invoking the provisions of s. 40A(2)(b) but it does not call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, AOP or HUF, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person. Explanation: For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a business or profession, if,- (a) in a case where the business or profession is carried on by a company, such person is, at any time during the previous year, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the assessee to disclose income of others which is includible in his income. In the aforesaid case, the principle laid down in the case of V.D.M.RM.M.RM. Muthiah Chettiar has been only reiterated but distinguished on the ground that the note in the form of return of income had been overlooked. Since no specific form of disclosure is contemplated by the Act as well as the Rules and the form of return prescribed, an assessee can never be held to be guilty of non-disclosure of income which is determined by applying the provisions of s. 40A(2)(b). We therefore hold that in the absence of any provision of particular disclosure of the transaction in question, the disclosure of the same in its books of account as done by the assessee was sufficient in law. 6. There cannot be any charge of furnishing inaccurate particulars as well. This is because, the assessee had furnished all the details and the details admittedly were correct. By applying deeming provisions of law the disallowance has been made by the AO. But for these deeming provisions the AO could not have made any disallowance, as admittedly the genuineness as well as the incurring of the expenditure, have not been doubted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income."
"Concealment of 'income' and 'furnishing of inaccurate particulars' are different. Both concealment and furnishing inaccurate particulars refer to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of supressio veri or suggestio falsi. Although it may not be very accurate or apt but suppressio veri would amount to the concealment, suggestio falsi would amount to furnishing of inaccurate particulars."
8. In the present case the disallowance under s. 40A(2)(b) cannot be considered as concealment of income or furnishing inaccurate particulars. Consequently we are of the opinion that the facts of the case does not warrant penalty under s. 271(1)(c). Therefore, the order of the CIT(A) is set aside. Penalty cancelled.
9. In the result, appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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