INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Disallowance under section 40(a)(ia) - Allegation that assessee should have disallowed the corresponding expenditure and not the TDS amount -

During the assessment proceedings, AO on a perusal of the audit report noticed that the auditor had submitted the details of unpaid TDS. On a query being made, assessee submitted that it had voluntarily disallowed the TDS amount under section 40(a)(ia). AO, being of the view that assessee should have disallowed the corresponding expenditure and not the TDS amount, disallowed the amount under section 40(a)(ia). Assessee did not contest the aforesaid disallowance. AO initiated proceedings for imposition of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income and concealment of income. Held: In the statutory audit report itself, auditor had furnished the details of expenditure in respect of which tax was not deducted at source. It was also evident that assessee had voluntarily made some disallowances under section 40(a)(ia). However, mistake committed by assessee was, instead of disallowing expenditure incurred which was subject to TDS, it had computed the TDS amount of such expenditure and had disallowed under section 40(a)(ia). In any case of the matter, AO had not doubted either the genuineness of the expenditure claimed or the payments made. Only reason for which the expenditure was disallowed was due to non-deduction of tax at source. Assessee cannot be accused of submitting inaccurate particulars of income or concealing its income. Accordingly, penalty imposed under section 271(1)(c) was deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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