Penalties under Income-tax Act section 271(1)(c) deleted for acceptable accounting method

The penalties imposed under section 271(1)(c) of the Income-tax Act were deleted by the Commissioner of Income-tax (Appeals) in two appeals. The Assessing Officer had levied penalties due to the assessee's accounting method not including work-in-progress for income computation. The CIT(A) found the method used was acceptable and did not conceal any figures, leading to the deletion of penalties. The Tribunal upheld this decision, emphasizing that a change in accounting method did not amount to furnishing inaccurate particulars of income, in line with the decision in CIT v. Reliance Petroproducts Pvt. Ltd.

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Issues involved: The judgment involves the deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 by the Commissioner of Income-tax (Appeals) in two appeals by Revenue and Cross Objection by the assessee.

Issue 1 - Deletion of Penalty by CIT(A): The Assessing Officer levied penalties under section 271(1)(c) of the Act due to the assessee's method of accounting, which did not include work-in-progress for computing income. The CIT(A) deleted the penalties, stating that the system of accounting used by the assessee was widely accepted and did not conceal any figures. The CIT(A) found that the assessee provided all necessary particulars for income computation, and the change in accounting method did not amount to furnishing inaccurate particulars of income.

Issue 2 - Arguments and Decision: The Revenue argued that the penalty was justified as the assessee did not follow the correct accounting method. However, the assessee contended that the change in accounting method did not result in inaccurate particulars of income. The Tribunal agreed with the assessee, citing the decision in CIT v. Reliance Petroproducts Pvt. Ltd., where it was held that a mere unsustainable claim in the return does not amount to furnishing inaccurate particulars. The Tribunal confirmed the CIT(A)'s decision to delete the penalties in both appeals.

Separate Judgement: The judgment was delivered by Shri Mahavir Singh, Judicial Member, and Shri N.S. Saini, Accountant Member of the Appellate Tribunal ITAT Ahmedabad.

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