ITAT New Delhi held In the case of Tristar Intech Pvt. Ltd. vs. ACIT that for levy of penalty u/s 271(1)(c) there should be concealment of income on the part of assessee. In the given case AO has initiated penalty proceeding u/s 271(1)(c) on the basis that the assessee has concealed the particulars of income but penalty ultimately levied on the assessee for furnishing inaccurate particulars by the Explanation 1 to Section 271(1)(c). Explanation 1 is a deeming provision and is applicable only when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed. Explanation 1 cannot be applied in a case where the assessee furnishes inaccurate particulars of income but applicable to a case of “Concealment of Income”.
Facts of the Case
The assessee company is engaged in the business of contractors of waterproofing projects, construction related to infrastructure projects, dismantling of existing buildings etc. The assessee filed its return of income on 30.11.2006 declaring total income of Rs. 10,28,830/-. The same was processed u/s 143(1). The assessing office concluded the assessment on 30.12.2008, by making the total additions of Rs. 34,13,249 on the ground of excess depreciation on plant & machinery, non capitalization of expenses on account of custom duty & shipping expenses, unpaid statutory liability u/s 43B and late deposit of PF & ESI. There was no appeal against this order by the assessee. Hence, the AO initiated the penalty proceedings u/s. 271(1) (c) and finalized the penalty proceedings by stating that the assessee has furnished inaccurate particulars of income.
Contention of the Assessee
The ld counsel of the assessee submitted that, to the facts and circumstances of the case, Explanation 1 to Section 271(1) (c) of the Act could not be invoked for the following reasons;
(i) Assessee has offered explanation to the AO at the time of assessment;
(ii) Explanation so offered by the assessee has not been found to be false by the AO;
(iii) Assessee in bonafide belief has filed all the details and records in respect of the additions made were placed before the AO.
For the above submission, he placed reliance on the judgment passed by the Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products reported in 322 ITR 158 and judgment of Indore Tribunal in the case of DCIT vs. Nepa Limited reported in (2015) 58 taxmann.com 137, wherein an identical issue was addressed.
He also made his submissions that in the assessment order passed u/s.143 (3), the satisfaction has been recorded for concealment of income u/s 271(1) (c) of the Act. It is argued by ld. A.R that the AO has recorded the satisfaction for concealment of income and the penalty has been levied for furnishing of inaccurate particulars of income by considering Explanation 1 to Section 271(1)(c). Ld. AR further submitted that Explanation 1 to Section 271(1)(c) cannot be applied if the charge is for filing inaccurate particulars. The deeming fiction is that the Explanation 1 could be invoked only if there is a concealment of income.
Contention of the Revenue
The ld counsel of the revenue argued that there was a willful attempt on behalf of the assessee to evade tax. He placed reliance on the judgment of Hon’ble jurisdictional High Court in the case of CIT vs. Arcotech Ltd. in ITA No. 71/2013. He further argued that the assessee had filed inaccurate particulars, which was brought to the notice of the assessee at the time of assessment proceedings and, therefore, there was a willful attempt to evade tax.
Held by CIT (A)
The CIT (A) confirmed the order of AO and upholds the penalty u/s 271 (1) (c).
Held by ITAT
It is observed that mistake of the assessee was bonafide which has been corrected by filing revised return before completion of assessment. Merely because there were some discrepancies, it cannot be held that the assessee intended to evade tax. The assessee had rectified the same and had accepted the mistake before the AO. The assessee also chose not to prefer appeal before the first appellate authority, itself shows that the mistakes were not willful.
The delayed payment in respect of employees’ contribution to PF & ESI needs to be given liberal approach in view of the ratio laid down by the Hon’ble Delhi High Court in the case of CIT v. P.M. Electronics Ltd., 220 CTR 635 (Delhi) while relying upon the decision of Hon’ble Apex Court in the case of CIT Vs. Vinay Cement Ltd.,213 CTR (SC) 268 , concurred with the view taken by the Hon’ble Madras High Court in Nexus Computer (P) Ltd.,219 CTR(Mad) 54 that employer/employees’ contribution towards provident fund payments made after the due date prescribed under the Employees’ Provident Fund Act and Rules made there under but before the due date for furnishing the return of income under sub sec. 1 of sec. 139 of the Act, are allowable under s.36(1)(va) read with sec. 2(24(x) and sec. 43B of the Act.
The decision relied on by the DR of the jurisdictional High Court in the case of Arcotech (supra) are distinguishable on the facts because in the said case, the assessee had not substantiated the claims and thus had not discharged the onus and even the audit report was silent in respect of the facts which was not disclosed. The assessee therein claimed the ignorance of law for substantiating the wrong claims. Whereas the facts before us the assessee has demonstrated the manner in which the mistake has been corrected, thereby discharging the onus.
The error that was brought to the notice in respect of depreciation was a bonafide error, which was corrected by the assessee by filing revised return during the assessment proceedings. The remaining additions made by the AO do not call for levy of penalty under this provision because these are mere disallowances made by the AO but not conclusive evidence of concealment. We, therefore, by keeping in view the ratio laid down in the judgment of Reliance Petro Products 322 ITR 158 and Price Water House Coopers Pvt. Ltd. vs. CIT reported in (2012) 348 ITR 306 passed by the Hon’ble Supreme Court and jurisdictional High court in the case of of DCIT vs. Nepa Limited reported in (2015) 58 taxmann.com 137, delete the penalty u/s 271(1) (c).
Accordingly, appeal of the assessee allowed.