ITAT deleted penalty as assessee did not conceal or file inaccurate income

1. The assessee company was engaged in the business of construction of residential flats. It had construction contracts with DDA and Group Housing Societies. During the year under consideration, the assessee declared taxable income of Rs.62,88,941/- on a turnover of Rs.34,70,27,097/-. The assessee was maintaining its regular books of accounts which were audited both under the Companies Act, 1956 and under section 44AB (of Income Tax Act, 1961). The return of Income was selected for scrutiny u/s 143(2) (of Income Tax Act, 1961) and all the details along with audited accounts , tax audit reports as called for were duly furnished. The assessment was made under section 143(3) (of Income Tax Act, 1961) at Rs.70,63,560/- and the AO made the disallowance of Rs.1,95,240/- being 10% of miscellaneous expenses, repair & maintenance etc. being unverifiable in nature and disallowance of Rs.5,79,374/- being loss on sale of asset which was debited to profit & loss account. The additions so made by the AO was agreed upon by the assessee, therefore, he did not prefer any appeal before the CIT (A) and the assessment became final. he AO initiated penalty proceedings against the assessee. The assessee participated in the penalty proceedings and brought to the knowledge of the AO that the loss on sale of fixed asset of Rs.5,79,374/- was reflected in schedule 18 of the audited accounts. He further submitted that while computing the depreciation under the Act, the gross sale consideration was reduced and the depreciation has been claimed at the reduced WDV. However, he submitted that due to clerical mistake, the said amount was omitted in the computation. He submitted that in the copy of the Income-tax computation, the said disallowance had been mentioned but inadvertently the amount was omitted. However, the AO was not convinced and levied a penalty at the minimum rate of 100% which came to Rs.1,95,017/-.

2. CIT(A) upheld the penalty.

3. ON appeal, the ITAT held as under:

"We note that the assessee participated in the penalty proceedings and brought to the knowledge of the AO that the loss on sale of fixed asset of Rs.5,79,374/- was reflected in Schedule 18 of the audited accounts. We also note that while computing the depreciation under the Act, the gross sale consideration was reduced and the depreciation has been claimed at the reduced WDV. However, due to clerical mistake, the said amount was omitted in the computation. We find that in the copy of the Income-tax computation, the said disallowance had been mentioned but inadvertently the amount was omitted. We further note that in the balance sheet at col. No.18 of Other Expenses, Rs.5,79,374/- was shown as Loss on sale of fixed assets (page 19 of the paper book), however, in the computation in the head 'Loss on sale / discard of assets, the amount was not reflected (page 6 of the paper book). We also find that even during the course of assessment proceedings, all the information relating to the sale of asset had been furnished and the bonafide mistake that was made was accepted and the said amount was offered for taxation. We note that it is also not a case wherein the said amount was reflected under wrong head or concealed but the same was duly reflected in the audited accounts. We find that there is no deliberate attempt on the part of the assessee either to conceal income or to file inaccurate particulars of income. The assessee at the time of assessment proceedings has given all the details before the completion of the assessment proceedings.

Having regard to the above principles laid down, the claim of the assessee could not be regarded either as "false" or not "bonafide" so as to conclude that assessee has furnished inaccurate particulars of income. Therefore, we set aside the orders of the authorities below and allow the appeal of the assessee.”

Case Reference - M/s. Best Buildwell (Pvt.) Ltd., vs. DCIT, Circle 2 (1).

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH 'A' : NEW DELHI)

BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND

SHRI A.T. VARKEY, JUDICIAL MEMBER

ITA No.5167/Del./2013

(ASSESSMENT YEAR : 2009-10)