2011 (4) TMI 130 - AT - Income Tax

Tribunal upholds CIT(A) order, cancels penalties under Income-tax Act for disclosed claims

Assistant Commissioner of Income-tax, Circle 4(1), New Delhi Versus Jindal Equipment Leasing & Consultancy Services Ltd.

Assistant Commissioner of Income-tax, Circle 4(1), New Delhi Versus Jindal Equipment Leasing & Consultancy Services Ltd. - TMI Issues Involved:1. Deletion of penalties levied under section 271(1)(c) of the Income-tax Act, 1961.2. Furnishing inaccurate particulars of income and concealing taxable income.3. Application and interpretation of section 14A of the Income-tax Act, 1961.4. Bona fide explanation and substantiation of the assessee's claims.Issue-wise Detailed Analysis:1. Deletion of Penalties Levied Under Section 271(1)(c) of the Income-tax Act, 1961:The revenue appealed against the consolidated order passed by the CIT(A)-VII, New Delhi, which deleted penalties levied by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. The penalties amounted to Rs. 1,01,14,199 for the assessment year 1999-00 and Rs. 45,44,158 for the assessment year 2001-02. The CIT(A) had deleted these penalties, finding that the assessee had disclosed all material facts and that mere disallowance or addition does not justify the levy of penalty.2. Furnishing Inaccurate Particulars of Income and Concealing Taxable Income:The Assessing Officer found that the assessee had furnished inaccurate particulars of income and concealed taxable income by claiming non-allowable expenses incurred for earning exempt income under section 10(33) of the Income-tax Act. The assessee had paid interest on borrowed capital employed for investment in shares on which dividend income was received, which was not includible in the total income. The Assessing Officer disallowed a proportionate amount of interest and administrative expenses, leading to the computation of a lower total loss and initiation of penalty proceedings.3. Application and Interpretation of Section 14A of the Income-tax Act, 1961:Section 14A was inserted in the Act by the Finance Act, 2001, retrospectively with effect from 1-4-1962. The return for the assessment year 1999-00 was filed before the insertion of this provision, and the revised return was also filed prior to its insertion. The assessee could not have been expected to make any disallowance in terms of the provision at the time of filing the return. The CIT(A) found that the initial burden to rebut the presumption of Explanation 1 to section 271(1)(c) was on the assessee, which could be rebutted by showing bona fides through an explanation. The assessee had disclosed all material facts, and the claim did not amount to furnishing inaccurate particulars of income.4. Bona Fide Explanation and Substantiation of the Assessee's Claims:The CIT(A) noted that the assessment and penalty proceedings are different, and the findings in assessment proceedings are not conclusive for the levy of penalty. The assessee had made a claim regarding the deduction of expenses, which was not found to be legally acceptable. However, the claim was made in a bona fide manner, and all material facts were disclosed. The Tribunal found that the levy of penalty by the Assessing Officer was not justified, as the assessee had disclosed all facts and there was no suppression of facts. The Tribunal also considered the case of Nalwa Investments Ltd., where similar penalties were deleted, finding that the disallowance was contentious and involved a bona fide difference of opinion.Conclusion:The Tribunal upheld the CIT(A)'s order, deleting the penalties for both assessment years, concluding that the assessee's claims were bona fide, and all material facts were disclosed. The appeals by the revenue were dismissed.