Appeal allowed by ITAT Hyderabad, canceling penalty under sec 271(1)(c) of Income Tax Act.

The ITAT Hyderabad allowed the appeal of the assessee, canceling the penalty imposed under section 271(1)(c) of the Income Tax Act. The ITAT determined that there was no evidence of deliberate concealment or furnishing inaccurate particulars, as the discrepancies in the wages account were unintentional errors and not indicative of willful tampering. The ITAT found that since the additions were accepted during assessment without allegations of manipulation, the penalty imposition was unwarranted.

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Issues:
Levy of penalty u/s.271(1)(c) of the Income Tax Act.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) on the issue of penalty under section 271(1)(c) of the Income Tax Act. The Assessing Officer had made an addition to the total income of the assessee due to discrepancies in the wages account, which the assessee accepted. The Assessing Officer then initiated penalty proceedings, alleging that the assessee deliberately furnished inaccurate particulars of income to avoid penalties. The penalty was levied at Rs. 1,95,000.

Before the CIT(A), the assessee argued that the discrepancies were genuine mistakes and there was no intention to manipulate or interpolate the records to avoid tax payment. However, the CIT(A) upheld the penalty, concluding that the assessee willfully tampered with the books of accounts to evade tax. The assessee contended that the observations regarding tampering were unwarranted and that the discrepancies were unintentional errors in the business operations. The Assessing Officer and CIT(A) maintained that the tampering was deliberate, justifying the penalty imposition.

The ITAT Hyderabad considered the contentions and reviewed the orders and documents. It was established that the assessee supplied labor to various industries and had units outside the state. The Assessing Officer made additions based on discrepancies in the wages account, but there was no allegation of manipulation in the assessment order. The ITAT found no reason for the assessee to tamper with the records after the additions were agreed upon during assessment. The discrepancies noted during the penalty order were not raised in the assessment order. The ITAT concluded that no penalty was warranted as the additions were agreed upon, and there was no evidence of deliberate concealment or furnishing inaccurate particulars. The ITAT canceled the penalty and allowed the assessee's appeal.

In conclusion, the ITAT Hyderabad allowed the appeal of the assessee, canceling the penalty under section 271(1)(c) of the Income Tax Act.

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