Vitthal Sahakari Sakhar Karkhana Ltd Vs ACIT (ITAT Pune)
Mere Additions Do Not Establish Concealment- Pune ITAT Deletes Penalty under Section 271(1)(c) on VSI Contribution & Omitted Section 244A Interest
The Pune ITAT allowed the assessee’s appeal and deleted the penalty of Rs.4,14,259 levied under Section 271(1)(c) of the Income-tax Act, 1961 in respect of additions relating to VSI contribution and interest received under Section 244A. The assessee, a co-operative society, had originally declared a loss, and during assessment the Assessing Officer made various additions, of which the CIT(A) sustained only the addition of VSI contribution of Rs.13,15,926 and interest under Section 244A of Rs.34,716. The Tribunal noted that the issue of VSI contribution had already been decided in favour of the assessee in earlier judicial decisions, including a coordinate bench ruling, and held that merely because the assessee did not challenge the quantum addition, penalty under Section 271(1)(c) could not be levied. Regarding the omitted Section 244A interest, the Tribunal accepted the assessee’s explanation that the omission occurred due to non-availability of the refund break-up and was a human error without any deliberate attempt to conceal income or furnish inaccurate particulars. Accordingly, it directed cancellation of the penalty on both additions and allowed the appeal.
The Pune Bench of the Income Tax Appellate Tribunal deleted the penalty levied under section 271(1)(c) on additions relating to Vasantdada Sugar Institute (VSI) contribution and interest received under section 244A, holding that the facts did not establish either concealment of income or furnishing of inaccurate particulars. The Tribunal reiterated that mere confirmation of a quantum addition does not automatically justify imposition of penalty.
The assessee, a co-operative sugar factory, had filed its return declaring a loss. During scrutiny, the Assessing Officer made various disallowances, including VSI contribution of ₹13.16 lakh and interest on income-tax refund of ₹34,716. While the CIT(A) deleted certain additions, these two additions were sustained, following which the Assessing Officer levied a penalty of ₹4.14 lakh under section 271(1)(c), which was also confirmed by the CIT(A).
Before the Tribunal, the assessee submitted that the allowability of VSI contribution was already covered in its favour by the Bombay High Court in CIT v. Jai Ambika Sahakari Sakhar Karkhana Ltd. and by the Tribunal’s own earlier decision in the assessee’s case. Therefore, merely because the assessee had not challenged the quantum addition further, penalty could not be levied on a claim that was otherwise legally debatable and supported by judicial precedents.
Accepting the contention, the Tribunal held that penalty is not leviable merely because the quantum addition has attained finality. Since the claim for VSI contribution was supported by binding judicial precedents, it could not be treated as a case of concealment or furnishing of inaccurate particulars. Accordingly, the penalty relating to the VSI contribution was deleted.
With regard to the omission to disclose interest under section 244A, the Tribunal accepted the explanation that the refund had been directly credited by the Department without separately indicating the interest component and that the omission occurred due to the absence of a detailed break-up. Considering the small amount involved and the plausible explanation offered, the Tribunal held that the lapse amounted to a bona fide human error and not a deliberate attempt to conceal income. While the addition could be sustained, the ingredients necessary for levy of penalty under section 271(1)(c) were absent. The Tribunal therefore directed cancellation of the penalty on this addition as well.
Accordingly, the Tribunal set aside the order of the CIT(A), cancelled the entire penalty under section 271(1)(c), and allowed the assessee’s appeal.
Author’s Comments:
The decision reiterates an important principle that penalty proceedings are distinct from quantum proceedings. Even where an addition is sustained, penalty cannot follow automatically unless there is clear evidence of concealment or furnishing of inaccurate particulars. The ruling is particularly significant in holding that a claim supported by judicial precedents remains a bona fide claim, and that inadvertent omission of a small amount of section 244A interest due to lack of proper details constitutes a human error rather than concealment, thereby not warranting penalty under section 271(1)(c).
Cases Discussed
1. Shri Vithal Sahakari Sakhar Karkhana Ltd. vs. ITO, ITA No.163/PUN/2018, order dated 15.07.2022
