2018 (7) TMI 285 - AT - Income Tax

Penalty under Income Tax Act deleted as Tribunal finds no deliberate concealment or inaccurate particulars

The Tribunal held that the disallowances made by the Assessing Officer did not constitute deliberate concealment or furnishing inaccurate particulars of ... Levy of penalty u/s 271(1)(c) - disallowance under section 14A read with rule 8D(2)(iii) - Held that:- Half percentage of average value of investment being administrative expenses the assessee has filed the income and expenditure account for the year ended 31-03-2011 which clearly proves that none of the expenses are co-related to the exempt income by the lower authorities neither during assessment proceedings nor during penalty proceedings that the same relates to exempt income. We have also gone through the income and expenditure account and even now before us there is no averment that the particular expenditure is relatable to exempt income. Disallowance made by AO for non-deduction of TDS under the TDS provisions on purchase of software Revenue could not pointed out under which provision the TDS has to be deducted. The assessee made these expenses for purchase of software Programme, which has been treated by the assessee as having life of one year and hence, written off and claim the same as expenses. We are of the view that the purchase of software does not attract any TDS provision. Disallowance of business promotion expenses for non-presentation of vouchers is for the reason that the amount paid on tea, coffee etc. on clients is due to smallness of denomination of payments and bills and vouchers could not be preserved. Accordingly, in our view this has not a case of furnishing of inaccurate particulars of income because the assessee has filed all the particulars of income before the AO during the assessment proceedings or in the return of income. This may be a case of disallowance of expenses but it is not a case of furnishing of inaccurate particulars of income. It cannot be said that the assessee has concealed the income by furnishing of inaccurate particulars of income. Accordingly, we delete the penalty and allow the appeal of the assessee. Issues:Levy of penalty under section 271(1)(c) of the Income Tax Act based on disallowances made by the Assessing Officer.Analysis:1. The only issue in this appeal was against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c) of the Act. The disallowances included administrative expenses, non-deduction of TDS on software purchase, and business promotion expenses. The AO initiated penalty proceedings as the assessee could not provide satisfactory explanations during assessment proceedings. The AO concluded that the added income was deliberately concealed, falling within the ambit of explanation 1 to section 271(1)(c).2. The CIT(A) confirmed the penalty, emphasizing the need for deliberate concealment or furnishing inaccurate particulars of income. The Tribunal noted that the AO failed to establish a direct link between the disallowed expenses and the exempt income. It was observed that the disallowance of expenses did not amount to furnishing inaccurate particulars of income, as the assessee had disclosed all relevant details during assessment.3. The Tribunal analyzed each disallowance separately. Regarding the disallowance under section 14A read with Rule 8D, it was found that no expenses were related to exempt income. The disallowance for non-deduction of TDS on software purchase was deemed incorrect as software purchases do not attract TDS provisions. The disallowance of business promotion expenses due to lack of vouchers was considered a case of necessary expenditure, not inaccurate particulars of income.4. Citing legal precedents, the Tribunal highlighted the distinction between wrong claims/disallowances and deliberate concealment of income. The Tribunal concluded that the disallowances made by the AO did not amount to deliberate concealment or furnishing inaccurate particulars of income. Therefore, the penalty under section 271(1)(c) was deleted, and the appeal of the assessee was allowed.In conclusion, the Tribunal found that the disallowances made by the AO did not amount to deliberate concealment or furnishing inaccurate particulars of income. The penalty under section 271(1)(c) was deleted, and the appeal of the assessee was allowed.