2023 (7) TMI 732 - AT - Income Tax

Appeal Allowed: Penalties for Inaccurate Income Details Deleted

Shri Hardik Mahendrabhai Patel, (Prop. of First Care Corporation) Versus The Dy. Commissioner of Income Tax, Central Circle – 1 (4), Ahmedabad.

The ITAT allowed the Assessee's appeal, ruling that penalties under Section 271(1)(c) for inaccurate particulars of income, disallowance of genuine ... Penalty u/s 271(1)(c) - difference between contract receipt as per books of accounts and as per Form No.26AS statement - HELD THAT:- Such mistake was a bonafide mistake due to volume of contract receipts from various sites and from various parties certain receipts were not taken into account by the assessee. As relying upon the decision of CIT vs. Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein it is held that making of incorrect claim in law cannot tantamount to furnishing of inaccurate particulars or concealment of income. Therefore, the penalty levied under the same does not sustain. Penalty in respect of disallowance u/s 40A(3) for Vehicle Expenses, the same cannot be said as concealment of income as the assessee has genuinely claimed the vehicle expenses and, therefore, the penalty in respect of this item does not sustain. Penalty in respect of disallowance u/s 40A(3) for cash payment for purchase of Gold Ornaments, the assessee has genuinely claimed the said expenditure and, therefore, it cannot be treated as concealment of income or furnishing of inaccurate particulars of income. This penalty also does not sustain. Disallowance u/s 36(1)(va) for delay in depositing employees Provident Fund, the same does not sustain as the issue at the time of assessment proceedings was a debatable issue and certain decisions of Hon’ble High Courts were in favour of the assessee. Therefore, this cannot be treated as concealment of income or furnishing of inaccurate particulars of income. The penalty on this disallowance also does not sustain. Appeal of the assessee is allowed. Issues Involved:1. Penalty for providing inaccurate particulars of income under Section 271(1)(c).2. Penalty for disallowance of genuine expenditure under Section 40A(3).3. Penalty for disallowance under Section 36(1)(va) for delayed deposit of employees' contribution to PF & ESI.Summary:Issue 1: Penalty for Providing Inaccurate Particulars of IncomeThe Assessee appealed against the penalty of Rs. 5,20,951/- imposed under Section 271(1)(c) for providing inaccurate particulars of income. The CIT(A) sustained the penalty based on the sustained additions/disallowances by the appellate authorities. The Assessee argued that the difference of Rs. 5,62,893/- in income as disclosed in the return and as per Form 26AS was due to bona-fide reasons explained during the assessment proceedings. The ITAT held that the mistake was bona fide due to the volume of contract receipts and relied on the Supreme Court's decision in CIT vs. Reliance Petroproducts (P) Ltd., 322 ITR 158, stating that making an incorrect claim in law does not amount to furnishing inaccurate particulars or concealment of income. Therefore, the penalty was not sustained.Issue 2: Penalty for Disallowance of Genuine Expenditure under Section 40A(3)The Assessee contested the penalty for disallowance of Rs. 54,010/- under Section 40A(3) for vehicle expenses paid in cash. The Assessee argued that the expenditure was genuine and only disallowed due to the mode of payment. The ITAT concluded that the penalty could not be sustained as the expenditure was genuinely claimed and did not constitute concealment of income or furnishing inaccurate particulars.Issue 3: Penalty for Disallowance under Section 36(1)(va)The Assessee challenged the penalty for disallowance of Rs. 10,69,021/- under Section 36(1)(va) for delayed deposit of employees' contribution to PF & ESI. The Assessee argued that the issue was debatable, with divergent views from different courts, and the expenditure was otherwise genuine. The ITAT noted that at the time of assessment, certain High Court decisions were in favor of the Assessee, making it a debatable issue. Therefore, the penalty for this disallowance was also not sustained.Conclusion:The ITAT allowed the Assessee's appeal, ruling that penalties under Section 271(1)(c) for the aforementioned issues were not sustainable due to the bona fide nature of the mistakes, genuine claims of expenditure, and the debatable nature of the issues involved. The penalties aggregating to Rs. 5,20,951/- were deleted.