ITAT cancels penalty under Sec. 271(1)(c) for AY 2008-09 for manufacturing company

The Appellate Tribunal ITAT Ahmedabad canceled the penalty imposed under Sec. 271(1)(c) for the assessment year 2008-09 on the company engaged in manufacturing and trading activities. The Tribunal ruled in favor of the assessee, a Sick Company, citing the absence of deliberate concealment of income and considering the company's financial crisis. The penalty was overturned based on the disclosure of disallowances in the tax audit report, leading to the cancellation of the penalty imposed by the Assessing Officer.

---

---

Issues involved: Penalty u/s. 271(1)(c) for assessment year 2008-09 based on disallowances u/s. 43B and 40A(7) in the tax audit report.

Summary:
The Appellate Tribunal ITAT Ahmedabad heard an appeal against a penalty order u/s. 271(1)(c) for the assessment year 2008-09. The Assessing Officer (A.O.) had levied a penalty of Rs. 3,53,794/- on the assessee, a company engaged in manufacturing and trading activities, for furnishing inaccurate particulars of income. The additions were made u/s. 43B and 40A(7) based on discrepancies in bonus and gratuity payments reported in the tax audit report.

During assessment, the A.O. disallowed Rs. 3,25,566/- claimed as bonus to employees as it was paid after the due date of filing the return, invoking u/s. 43B. Additionally, a provision for gratuity of Rs. 8,53,748/- was disallowed u/s. 40A(7) as it was not an actual payment. The A.O. initiated penalty proceedings u/s. 271(1)(c) based on these disallowances.

The assessee, a Sick Company with financial difficulties, argued that the disallowances were not deliberate attempts to conceal income but due to the company's financial crisis. However, the A.O. and CIT (A) upheld the penalty citing failure to disclose disallowances in the e-return and tax audit report.

On appeal, the Tribunal considered the assessee's status as a Sick Industrial Company with nil taxable income after adjustments. The disallowances were reported in the tax audit report, indicating no intention to conceal income. Citing the Price Waterhouse Coopers case, the Tribunal ruled in favor of the assessee, canceling the penalty under Sec. 271(1)(c).

In conclusion, the Tribunal allowed the assessee's appeal, canceling the penalty imposed by the A.O. The decision was based on the assessee's disclosure in the tax audit report and the absence of deliberate concealment of income.

Judges: Shri D.K. Tyagi, JM and Shri Anil Chaturvedi A.M.

---