TMI Blog2016 (5) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... ther balance of ₹ 22,33,724/- which was suo motu reversed by the assessee in assessment year 2008-09 should not be taxed in assessment year 2008-09 as it has been already taxed in assessment year 2007-08. From para 12 at page 7 of the said order, we find that the ld. CIT(A) allowed the appeal of the assessee by directing the AO not to tax the provision in the subsequent year which was not allowed in the earlier years. Thus we are of the opinion that the penalty imposed u/s 271(1)( c ) and as sustained by the ld.CIT(A) is wrong and against the provision of law. - Decided in favour of assessee - I.T.A. No. 6013/Mum/2014 - - - Dated:- 25-5-2016 - Shri Saktijit Dey, JM And Shri Rajesh Kumar, AM For the Appellant : Shri Dhanesh Bafna and Ms. Anusha Singh For the Respondent : Shri Rajesh Ojha ORDER Per Rajesh Kumar, AM This is an appeal filed by the assessee against the order dated 7.8.2014 passed by the ld.CIT(A)-4, Mumbai and it relates to the assessment year 2007-08. 2. The only issue raised in all the grounds of appeal is against the confirmation of penalty of ₹ 10,41,995/- levied u/s 271 (1) (c) of the Income Tax Act, 1961 (the Act) for dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the assessee used to create provisions for discount to be passed on and given to the customers if the payment due from them were received in time and where the payments were delayed such a provisions for discount were used to be reversed and offered to tax either in the same year or in the subsequent year. During the assessment year 2007-08, the assessee had created provision of discount amounting to ₹ 30,95,650/-. Out of which ₹ 8,00,331/- was passed on to the customers who made the payment within the stipulated time as per the terms of memorandum and the balance was reversed and offered to tax in the assessment year 2008-09. The ld. Counsel reiterated the submissions as made before the AO and the ld. CIT(A) that the practice was being followed which was being accepted by the department in the earlier as well as in the subsequent years. The ld. Counsel also submitted that the method of providing for discount and paying the discounts out of the provisions so created to those making the payment within time and reversing that part of the provisions which was not passed to the customers due to late payment and offering to tax was regular one. Therefore whole syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) observed that if a provision for discount was not allowed in the year of creation then reversal of the same in subsequent years could not be taxed. Therefore, AO is directed to verify the amount which have been reversed out of this provision and reduce the same from taxable income if it is included in the taxable income because the assessee had no time to revise the return of income by the time CIT(A) decided the issue. Similarly, the assessee has claimed to have made certain payments out of the provisions which are naturally charged to the provision account and not to the profit and loss account, whereas the provision had not been allowed, therefore, to the extent such discounts have been allowed by the assessee to the customers, allow the same as expenditure relating to the year under consideration because the provisions has already been disallowed in the earlier year, whereas undisputedly such discount allowed to customers is an allowable expenditure. Lastly, the ld.AR submitted that in view of these facts and circumstances and also in view of the ratio laid down in the decisions referred and relied upon, the penalty imposed by the AO and confirmed by the ld.CIT(A) was wrong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of which ₹ 8,23,376/- was passed on to the customers and remaining amount of ₹ 22,33,724/- was reversed and offered to tax in assessment year 2008-09. In para 3.5 of the said order, the assessee submitted that in case, the provision for discount is held to be contingent in nature in assessment year 2007-08, actual discount of ₹ 8,23,376/- passed on to the customers in assessment year 2008-09 should be allowed as expenditure in assessment year 2008-09 and further balance of ₹ 22,33,724/- which was suo motu reversed by the assessee in assessment year 2008-09 should not be taxed in assessment year 2008-09 as it has been already taxed in assessment year 2007-08. From para 12 at page 7 of the said order, we find that the ld. CIT(A) allowed the appeal of the assessee by directing the AO not to tax the provision in the subsequent year which was not allowed in the earlier years. For the sake of convenience we reproduce para 12 of the said order : 12. I have considered the facts of the case and submissions of the assessee. It is but natural that if a provision is not allowed then reversal of the same in subsequent years cannot be taxed. Therefore, A.O is dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but when the Department sought to take a different stand in the fourth year, the assessee gracefully submitted a revised return offering the item for taxation and accepted the assessment made. Thus, it was concluded by the Tribunal that exigibility of penalty under section 271(1)(c) would depend upon the facts and circumstances of the case, and after considering the totality of the facts and circumstances, the assessee could not be charged with concealment of income or with furnishing inaccurate particulars thereof. In the light of the facts found by the Tribunal, and in the absence of any evidence to show that such findings were incorrect in any manner whatsoever, it was not possible to accept the contention raised on behalf of the Revenue. It was not possible to state that the method of accounting adopted by the assessee was such that it did not reflect the position correctly considering the fact that for three years the same had been accepted by the Department. Once this was the position, the bona fides of the assessee could not be doubted, and the Tribunal was justified in holding that the assessee was entitled to hold a bona fide belief that the uncertified work-in-progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and it is only when he fails in his duty by not disclosing his income or part thereof, he conceals the particulars of his income. The duty is enjoined upon him to make a complete disclosure of his income as well as a correct disclosure. Therefore, if the disclosure made of the particulars of income is incorrect, then also he commits breach of his duty. Such defaults entail the penal consequences contemplated by section 271(1)(c)( iii). There cannot be a straight jacket formula for detection of these defaults of concealment or of furnishing inaccurate particulars of income and indeed concealment of particulars of income and inaccurate particulars of income may at times overlap. It depends upon the facts of the each case. In the assessment proceedings, the ITO while ascertaining the total income chargeable to tax would be in a position to detect the specific or definite particulars of income concealed or of which false particulars are furnished. Where in the constituents of income returned, such specific or definite particulars of income are detected as concealed, then even in the total income figure to that extent they reflect, it would amount to concealment to that extent. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed in computing the total income is deemed to represent the income in respect of which particulars have been concealed. As per the provision ofExplanation 1, the onus to establish that the explanation offered was bona fide and facts relating to the same and material to the computation of his income have been disclosed by him will be on the person charged with concealment. The explanation of the assessee for the purpose of avoidance of penalty must be an acceptable explanation; it should not be a fantastic or fanciful one. As indicated above, the consequence follows as a matter of law. The burden is on the assessee. If he fails to discharge that burden, the presumption that he had concealed the income or furnished inaccurate particulars thereof is available to be drawn. [Para 5.3 ] Part A of the Explanation to section 271(1)(c) provides that if assessee fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) to be false. This Explanation can, therefore, be applied only where the assessee has either not offered any explanation or where he has offered any explanation, the same found to be false by the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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