DCIT, UDUPI vs. M/S JANATHA FISH MEAL & OIL PRODUCTS, UDUPI

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ITA 130/BANG/2015Status: DisposedITAT Bangalore02 May 2017AY 2011-128 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the omission of income was due to inadvertence and not a deliberate attempt to conceal income, especially since the tax was paid and the assessee readily agreed to the addition. Therefore, the penalty levied under Section 271(1)(c) was unjustified.

What were the facts?

The assessee's return of income for AY 2011-12 was assessed at a higher income due to certain disallowances. The assessee later agreed to an addition of Rs. 24,28,197/- voluntarily, explaining it as an inadvertent omission due to a change in accountant. The Assessing Officer (AO) levied a penalty under Section 271(1)(c) for concealment of income.

What were the issues?

Whether an inadvertent omission of income, coupled with voluntary disclosure and payment of tax, constitutes concealment of income warranting penalty under Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 274

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Income Tax Appellate Tribunal, CIRCUIT BENCH AT MANGALORE

Before: SHRI INTURI RAMA RAO & SHRI SUDHANSHU SRIVASTAVA

For Appellant: Shri Siddappaji, Addl.CIT(DR)
Hearing: 03/02/2017Pronounced: 02/05/2017

Per INTURI RAMA RAO, AM :

1.

This is an appeal filed by the revenue directed against the order of the CIT(A), Mysore, dated 13/11/2014 deleting penalty of Rs.15,00,630/- levied u/s 271(1)(c)of the Income-tax Act,1961 [‘the Act’ for short] for the assessment year 2011-12.

Page 2 of 8 2. The revenue raised the following grounds of appeal:

3. Briefly facts of the case are as under: The respondent- assessee is a firm engaged in the business of manufacture of fish meal and fish. Return of income for the assessment year 2011-12 was filed on 15/09/2011 declaring a total income of Rs.3,49,40,000/-. After processing the said return of income u/s 143(1) of the Income-tax Act,1961 [‘the Act’ for short], the assessment was completed u/s 143(3) vide order dated 30/12/2013 at a total income of Rs.4,50,26,415/- after making the following disallowances:

4. The assessment order attained finality as the respondent- assessee chose not to agitate the additions before the appellate authorities. While matter stood thus, the AO issued show cause notice u/s 274 r.w.s. 271(1)(c) of the Act dated 30/12/2012 calling upon the respondent-assessee to show cause why penalty should be levied in respect of addition of Rs.24,28,197/-. In response to said show cause notice, the respondent-assessee filed explanation, vide its letter dated 21/4/2014 which reads as under:

5.

From the above explanation it is clear that the respondent- assessee offered the amount of Rs.24,28,197/- voluntarily on account of the following items:

6.

During the course of survey proceedings, the same was not included in the return of income filed by the respondent-assessee because of change of the Accountant and the respondent- assessee was under bona fide impression that the same was included in the return of income. It is further submitted that the tax on the same was already paid by the assessee-respondent. When this was brought to the notice of the respondent-assessee during the course of assessment proceedings, the respondent- assessee firm readily agreed for the same. After considering the above explanation of the assessee, the AO had come to conclusion that the respondent-assessee-firm had concealed particulars of income to the extent of Rs.24,28,197/- and levied

Page 6 of 8 penalty of Rs.15,00,630/- u/s 271(1)(c) of the Act vide order dated 16/05/2014.

7.

Being aggrieved, an appeal was preferred before the CIT(A) who vide impugned order deleted the penalty placing reliance on the decision of the Hon’ble Supreme Court in the case of Sir Shaadilal Sugar and General Mills Ltd. Vs. CIT (168 ITR 705).

8.

Being aggrieved, the revenue is in appeal before us in the present appeal.

The learned DR placed reliance on the orders of penalty u/s 271(1)(c) of the Act. On the other hand, learned counsel for assessee placed reliance on the order of the CIT(A).

9.

We heard rival submissions and perused material on record. The only issue that comes up for consideration in the present appeal is whether the CIT(A) was justified in deleting penalty levied u/s 271(1)(c) of the Act in the facts of the case. The undisputed facts of the case are that the addition was agreed by the respondent-assessee during the course of survey proceedings. However, the same was not included in the return of income filed subsequently. Tax due on this was paid by the respondent-assessee. However, during the course of assessment proceedings when it was brought to the notice of the respondent- assessee-firm, he readily agreed for addition.. The respondent- assessee has tendered explanation in response to notice u/s 271(1)(c) that omission in the return of income is only by inadvertence and not deliberate attempt. The bonafides of the Page 7 of 8 assessee were established by paying tax due on this item of addition. This explanation was not found to be false by the AO. Now, the Hon’ble Supreme Court has clearly held that omission of item of income by inadvertence does not constitute concealment of income in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (348 ITR 306) wherein it has been held as under vide para.19:

19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income.

10.

Having regard to the settled position of law, we are of the opinion that the CIT(A) was justified in deleting penalty levied and therefore we do not intend to interfere with the order passed by the CIT(A).

11.

In the result, the appeal filed by the revenue is dismissed.

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