Disallowance of expenses will not per se amount to furnishing inaccurate particulars of income - Merely because certain expenses claimed by the assessee are disallowed by an authority it cannot mean that the particular furnished by the assessee are wrong. Disallowance of an expense per se cannot mean that the assessee has furnished incorrect particulars of its income. Concealment involves penal action. It has to be proved as a conscious act. It is true that direct evidence may not be available in every case. Yet, it must be proved as a necessary corollary from the facts and circumstances established on the record - CIT v. Ajaib Singh & Co. [2002] 253 ITR 630 (Punj. & Har.).
In other words, the mere fact that certain amounts claimed by the assessee have been disallowed and treated as income does not necessarily lead to the conclusion that the assessee is guilty of fraud or willful neglect. The fact that the Explanation to section 271(1) (c) required the assessee to show that there was no fraud or willful negligence does not in any way enable the revenue to contened that there is a presumption of fraud or negligence without adducing any evidence whatever to substantiate such assertion – CIT v. Inden Bislers [2001] 118 Taxman 766(Mad.).
Where excessive claim of depreciation was made because of mistake of accountant and the assessee agreed to disallowances, it was to be treated as case of bona fide mistake so as to justify deletion of penalty- Deena Kak v. ITO[2001] 70 TTJ (Jodh.) 375
No penalty can be levied for disallowance made on account of entertainment expenses, expenses on personal user of vehicles or depreciation, the additions sustained by the Tribunal being of such a nature which would not warrant the levy of penalty under section 271(1) (c) – Guru Om Industries v. CIT [2003] SOT 50 (Ahd.) (SMC).
CIT Vs. Union Electric Corpon. (2006) 200 CTR 636 - Assessee accepted claim to be wrong during assessment, no penalty applicable.
DCIT Vs. Anupam Tiles Pvt. Ltd. ITAT Jaipur Tax world 214(2004) – held Trading addition on estimated basis. No penalty leviable.
Where addition was made on the basis of estimate and not on any concrete evidence of concealment or furnishing of inaccurate particulars, levy of penalty is not justified. Likewise, the addition made on account of difference of opinion about estimated rates of income and expenditure, will not justify levy of penalty –CIT v. Ravail Singh & Co. [2002] 122 Taxman 831(Punj. & Har.).
Merely because certain amounts incurred as expenditure are not found allowable as deduction in the assessment for lack of evidence, it cannot be said that the assessee has concealed its income – Vinod Kapur v. ITO [2003] 127 Taxman 53 (Mum.) (Mag.).
In sixth I.T.O. vs. Kumar Metal Industries 36 ITD 261 (Bom) the Tribunal held that if all the facts were disclosed by an assessee before the Income-Tax Authorities, no penalty can be levied merely because its claim was not acceptable to the revenue.
In CIT vs. Devandas Perumal & Co. 140 ITR 943 (Bom) the income was estimated. The Bombay High Court held that the presumption contemplated by the Explanation to section 271 (1) (c) stood rebutted by the fact that there was no suppression of any sales or inflation of any purchases. The mere fact that the Income-tax Officer proceeded to estimate the net profit at a figure higher than that what was disclosed by the assessee would not lead to the conclusion that there was a failure to return the correct income arising out of fraud or any gross or willful neglect on the part of the assessee.
In M.N. Irani and Mrs. M.N. Irani vs. ACIT 75 Taxman 129 (Bom) (Mag) it was held by the Bombay Tribunal that where the Tribunal confirmed part of the addition based on mere circumstantial evidence, levy of penalty is not justified.
