The Tax Publishers2019 TaxPub(DT) 0442 (Chen-Trib)

INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty was not justified as cessation of liabilities under section 41(1) would come into picture only when assessee claimed certain amounts as expenses in the earlier years and the same was also allowed by Revenue, therefore, once the transactions were accepted by Revenue in the earlier years, resulting effects i.e., cessation of liabilities in the subsequent years would not amount to concealment of income or furnishing of inaccurate particulars under section 271(1)(c).

Penalty under section 271(1)(c) - Concealment and furnishing of inaccurate particulars of income - Addition of income under section 41(1) -

AO noticed that assessee claimed a liability under the head 'sundry creditors for supplies' in the name of M/s. I Ltd. as an outstanding amount payable. On cross verification with M/s. I Ltd, AO noticed that there was no such amount shown as 'receivable' from assessee. As the assessee failed to offer any satisfactory explanations, AO treated the above liability shown by assessee as a liability ceased to exists and accordingly brought to tax as the income of the year under section 41(1). AO also levied penalty under section 271(1)(c) by considering the additions as concealment and furnishing of inaccurate particulars of income. Held: If the transactions were to be considered as concealment of income or furnishing of inaccurate particulars for the purpose of levying penalty under section 271(1)(c), it should be in the year(s) in which the transactions had been effected. Once the transactions were accepted by the revenue in the earlier years and resulting effects in the subsequent years will not amount to concealment of income or furnishing of inaccurate particulars under section 271(1)(c). Cessation of liabilities under section 41(1) would come into picture only when assessee claimed certain amounts as expenses in the earlier years and the same was also allowed by the revenue. In other words, the claims of the assessee were considered as genuine in the earlier years and in such a case no concealment or furnishing of inaccurate particulars can be presumed. If the transactions shown by assessee in its return of income was genuine and all the particulars of it were available in the return, mere withdrawal of the claim or not appealing against the assessment by assessee, would not amount to concealment of income or furnishing of inaccurate particulars. Thus, penalty levied under section 271(1)(c) was rightly deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2007-08



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