2011 (11) TMI 165 - AT - Income Tax

Waiver of penalty addition made on disallowance of expenses viz inter-corporate deposits sales commission factory misc exp Public Limited Company - even after additions the assessed income remained a loss - Held that - This is a case where explanation of the assessee has not been accepted by the Department. The levy of penalty is merely on disallowance of expenditure and not finding of concealment of any particulars or mala fide intention to reduce the taxable income. Therefore penalty is waived. - Decided in favor of assessee.

Summary

Issues:
- Deletion of penalty under section 271(1)(c) of the Income Tax Act.
- Interpretation of inaccurate particulars of income.
- Application of mind by the Assessing Officer.
- Disallowance of commission payment and factory miscellaneous expenses.
- Treatment of inter-corporate deposits and interest thereon.
- Legal principles governing penalty under section 271(1)(c).
- Consideration of explanations provided by the assessee.
- Justification for deletion of penalty by the CIT(A).
- Applicability of penalty in cases of unexplained cash credits.

Analysis:
The case involved an appeal by the Revenue against the deletion of a penalty of Rs. 6,29,093/- imposed under section 271(1)(c) of the Income Tax Act. The Assessing Officer (AO) levied the penalty based on additions made to the income of the assessee, which were sustained by the CIT(A) and the ITAT. The additions related to inter-corporate deposits, sales commission, and factory miscellaneous expenses. The AO held that the assessee furnished inaccurate particulars of income, leading to the penalty imposition.

The assessee contended that the penalty was unjustified, citing explanations provided during the assessment process. The assessee argued that the AO failed to consider the explanations adequately, leading to the erroneous imposition of the penalty. The CIT(A) deleted the penalty, considering the nature of the company as a public limited entity accepting deposits from the public. The CIT(A) concluded that the failure to produce certain depositors did not warrant a penalty for inaccurate particulars of income.

The Tribunal analyzed the legal principles governing the imposition of penalties under section 271(1)(c). It emphasized that for a penalty to be levied, there must be evidence of conscious concealment or furnishing of inaccurate particulars by the assessee. Mere additions to income do not automatically justify the imposition of a penalty. The Tribunal upheld the CIT(A)'s decision to delete the penalty, highlighting that the explanations provided by the assessee were not disproved, and there was no evidence of intentional concealment.

The Tribunal further referenced legal precedents and judgments to support its decision, emphasizing that the mere confirmation of additions to income does not establish inaccurate particulars of income. The Tribunal concluded that in the absence of conclusive evidence of deliberate concealment or furnishing of inaccurate particulars, the penalty was unwarranted. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty by the CIT(A).