Enhanced income resulting due to change in method of accounting, rather than concealment, does not merit penal consequences upon taxpayer: HC

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Enhanced income resulting due to change in method of accounting, rather than concealment, does not merit penal consequences upon taxpayer: HC 

THE ISSUE BEFORE THE DIVISION BENCH IS -Whether enhancement of income as a result of change in method of accounting, rather than concealment, does not merit levy of penalty upon the taxpayer. YES IS THE VERDICT.
Facts of the case:
The assessee company filed its returns for the relevant A.Y, and consequent thereto, addition of Rs.28.62 crores was made to returned income on account of reworking of the estimated project cost. The Department adopted a sum of Rs.1425.19 crores as the actual expenditure incurred on the project till the year end, against the estimated cost Rs.1628.02 crores. In addition, penalty u/s 271(1)(c) also came to be levied on account of enhancement of income.
When the matter reached Tribunal, the penalty came to be deleted. Hence, the Department approached this Court contending that the Tribunal had deleted the penalty without appreciating the fact that the penalty was levied on enhancement, on account of admitted under reporting of profits by filing wrong estimate of income of expenditure.
High Court held:

it is seen that the Tribunal has noted that calculations made by Department were directly related to the change in method of accounting rejecting the assessee’s figures and the method of accounting in this regard. The Tribunal, therefore, observed that whatever be the better method of accounting, this was not a case of concealment of income leading to penalty. The Tribunal noted that the addition of Rs.28.62 crores had the genesis in the estimation on one side and preponement of the expenditure on the other, based on change of method of accounting. Thus, the Tribunal found that the assessee had neither concealed the income nor concealing the particulars of such income. The penalty was, therefore, correctly deleted.

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