2020 (3) TMI 1142 - AT - Income Tax

Tribunal cancels penalty for inaccurate income reporting, finds disallowance unjustified.

M/s. Unique Ways Management Service Private Limited Versus ACIT-4 (1) Bhopal

M/s. Unique Ways Management Service Private Limited Versus ACIT-4 (1) Bhopal - TMI Issues:Penalty under section 271(1)(c) of the Income Tax Act 1961.Analysis:The appeal pertains to the Assessment Year 2006-07 and challenges the penalty imposed under section 271(1)(c) of the Income Tax Act. The appeal was filed against the orders of the Ld. Commissioner of Income Tax (Appeals)-1 and ACIT-4(1), Bhopal. The assessee did not attend the hearing before the authorities, and the penalty of Rs. 1,03,870 was confirmed by the Ld. CIT(A).During the assessment, the assessee declared a total income of Rs. 3,89,297 and claimed exempt income of Rs. 71,33,689. The initial assessment under section 143(3) accepted the returned income without any observation of concealment or inaccurate particulars. Subsequently, a reassessment was done under section 147, resulting in a disallowance under section 14A relating to finance charges. This disallowance led to the initiation of penalty proceedings, culminating in the imposition of a penalty of Rs. 1,03,807.The assessee contended that all expenses were duly shown in the Profit & Loss account, and there was no concealment or inaccurate reporting. The disallowance under section 14A was based on estimates and not specific expenses incurred for earning exempt income. As there was no evidence of mala fide intent on the part of the assessee, the Tribunal held that the penalty under section 271(1)(c) was unjustified. Consequently, the penalty of Rs. 1,03,870 was deleted, and the appeal of the assessee was allowed.In conclusion, the Tribunal set aside the findings of the Ld. CIT(A) and held that the penalty under section 271(1)(c) was unwarranted in the absence of any concealment or inaccurate reporting of income, ultimately ruling in favor of the assessee.