No penalty u/s 271(1)(C), when the taxable income and tax remains the same after adjusting the addition due to concealment

Brief about the case

The assessee was an apex marketing society in cooperative sector in West Bengal involved in the activities of marketing, procurement and distribution of fertilizer and other agricultural inputs like jute, paddy, seeds, and pesticides, etc. through various members, primary co-operative societies. The assessee has filed the return at an income of Rs.1,32,45,463/- on 03.11.2009. The assessment was completed on the returned income of Rs.1,32,45,460/- by making certain disallowances and allowing the set-off of the business loss for the assessment years 2003-04 and 2004-05. The assessee did not go in appeal in respect of disallowance of the provision amount as the same provisions were required only in accordance with the West Bengal State Cooperative Act. However in computation the assessee added back the provision for FBT, depreciation on WIP but did not add back other disallowances. The AO initiated the penalty under section 271(1)(c) for concealment of income and for furnishing of inaccurate particulars of income. The assessee went in appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee and sustained the penalty in respect of addition made due to provision for sundry debtors and provision for suspense.

Contention of the Assessee

Ld. AR of the assessee contented that the provision has been made by the assessee, as per the suggestion of the government auditor, vide their report dated 20.06.2008. The assessee is not aware of and while making the computation, the profit has not to be taken as per the audited profit & loss a/c. and therefore, a bona fide mistake has been committed by the assessee but that bona fide mistake does not envisage the penalty as there was proper disclosure about the particulars of the income as well as particulars of each of the provisions made by the assessee. There was no intention of the assessee to conceal the particulars of its income or furnishing inaccurate particulars of income. The AO has applied the provision of Explanation 4(a) to section 271(1)(c). This explanation is applicable when the amount of the income has the effect of reducing the loss declared in the return or converting the loss into income. In the case of the assessee, neither net loss declared in the return was reduced nor the loss has been converted into the income.

Contention of Revenue

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