Appeal upheld, penalty set aside for non-deductible expenses.

The Tribunal allowed the appeal filed by the apex marketing society in the cooperative sector, setting aside the penalty imposed under section 271(1)(c) for the assessment year 2008-09. The Tribunal held that the penalty was not sustainable as the disallowed provisions were not deductible expenses under the Income Tax Act, indicating potential concealment. Explanation 4(a) was found inapplicable as the additions made did not affect the declared loss or convert it into income. The Tribunal concluded that since the disclosed and assessed income were the same, the penalty under section 271(1)(c) was not justified.

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Issues Involved:
Sustainability of penalty under section 271(1)(c) for concealment of income and furnishing inaccurate particulars of income.

Analysis:

Issue 1: Sustenance of Penalty
The appeal was filed against the order of CIT(A) partly allowing the penalty imposed by AO for the assessment year 2008-09. The only issue in this appeal was the sustenance of the penalty under section 271(1)(c). The assessee, an apex marketing society in the cooperative sector, filed the return showing income of &8377; 1,32,45,463/-. The AO disallowed certain provisions made by the assessee, leading to the penalty imposition. The CIT(A) sustained the penalty in part, specifically for provisions related to sundry debtors and suspense.

Issue 2: Arguments and Decision
The AR contended that there was no concealment or furnishing of inaccurate particulars, as all details were disclosed. The provisions were made based on government auditor suggestions. The AO applied Explanation 4(a) to section 271(1)(c) regarding reducing loss or converting it into income, which, according to the AR, did not apply. The DR supported the tax authorities' order. The Tribunal noted that the disallowed provisions were not deductible under the Income Tax Act, indicating potential concealment. The Tribunal disagreed with the AR's argument, stating that the provisions were not allowable expenses under the law, and the assessee was fully aware of this fact.

Issue 3: Computation of Penalty
The AO imposed the penalty under Explanation 4(a), defining the tax to be evaded. However, the Tribunal found that this explanation did not apply in this case as the additions made did not affect the declared loss or convert it into income. The Tribunal referred to a Supreme Court decision to support its view that if the computation provision fails, there cannot be any penalty. Since the income disclosed and assessed were the same, the Tribunal concluded that Explanation 4(a) did not apply, setting aside the penalty imposed by the AO under section 271(1)(c).

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the penalty was not sustainable based on the circumstances and legal provisions analyzed during the proceedings.

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