2015 (4) TMI 1196 - HC - Income Tax

High Court affirms deletion of penalty under Income Tax Act citing lack of incriminating material

The High Court of Bombay upheld the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961, based on the Tribunal's decision. The ... Penalty u/s 271(1)(c) - deduction under section 80IB(10) disallowed - Held that:- The search took place in the instant case on 11th February, 2009 but the return came to be finalized prior to 11th February, 2009. However, the assessee may not have questioned the orders in Quantum Proceedings by filing any appeal, yet, the Tribunal found that the original return of income was filed on 31st October, 2005. That was accepted by the Assessing Officer. The search took place on 11th February, 2009 and the deduction under section 80IB(10) was disallowed by the Assessing Officer on grounds not germane to section 271(1)(c). Meaning thereby, there was no material found during search based on which the disallowance was made. The disallowance was on account of non-furnishing of audit report under section 10 CCB and non-furnishing of certain details as called for by the Assessing Officer. In these circumstances, the penalty as imposed cannot be sustained. We do not find such reasoning to be perverse or vitiated by any error of law apparent on the face of the record. - Decided in favour of assessee. Issues:Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on the Tribunal's decision.Analysis:The High Court of Bombay, comprising Justices S. C. Dharmadhikari and A. K. Menon, heard the appeal regarding the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal had provided cogent reasons for deleting the penalty, emphasizing that the return of income was filed and finalized before the date of the search. Despite the absence of an appeal in Quantum Proceedings challenging the orders, the Tribunal noted that the original return of income was filed on 31st October, 2005, accepted by the Assessing Officer. The search occurred on 11th February, 2009, and the disallowance of deduction under section 80IB(10) was not related to section 271(1)(c) grounds. The disallowance was due to the non-furnishing of an audit report under section 10 CCB and certain details requested by the Assessing Officer. Consequently, the penalty imposition was deemed unsustainable as no incriminating material was found during the search to support the disallowance. The Court found the reasoning sound and not tainted by any legal errors, leading to the dismissal of the appeal with no costs incurred.