2012 (7) TMI 12 - AT - Income Tax

Revenue's appeal dismissed, penalty canceled under Section 271(1)(c). Assessee not inaccurate, timing dispute.

DCIT, Circle 9(1) Versus M/s Speciality Food India P. Ltd.

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that canceled the penalty under Section 271(1)(c). The Tribunal found that the ... Penalty imposed u/s 271(1)(c)- assessee contested that simply because addition/disallowances have been sustained in appeal this fact would not lead to levy of penalty - Held that:- Penalty can not be imposed merely on the ground that the claim made by the appellant is allowable in the subsequent year - appellant has not made a false claim nor has it made a wrong claim, only the year in which it is allowable is under dispute between the assessee and the department,thus in such a situation penalty cannot be imposed - A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - in favour of assessee. Issues Involved:1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act.2. Whether the claim of expenses by the assessee was a false or inaccurate claim.3. The applicability of penalty provisions when there is a dispute about the year of expense crystallization.4. The relevance of different grounds for initiating and imposing penalty.5. The legal principles guiding the imposition of penalty under Section 271(1)(c).Issue-wise Detailed Analysis:1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act:The Revenue appealed against the CIT(A)'s order which deleted the penalty of Rs. 6,76,962/- imposed by the Assessing Officer (A.O.) under Section 271(1)(c). The A.O. had imposed the penalty on the grounds of furnishing inaccurate particulars of income, as the assessee's claim for expenses/liability of Rs. 18,50,000/- had not crystallized in the year under consideration. The CIT(A) quashed the penalty, reasoning that the dispute was only about the year of allowance, not the legitimacy of the claim itself, and thus, penalty under Section 271(1)(c) was not warranted.2. Whether the Claim of Expenses by the Assessee was a False or Inaccurate Claim:The A.O. argued that the assessee had furnished inaccurate particulars of income by claiming an expense that had not crystallized in the relevant year. The CIT(A) disagreed, stating that the claim was not false or wrong but was a matter of timing. The Tribunal upheld this view, noting that the assessee had disclosed full facts and the dispute was only about the year of crystallization, not the validity of the expense itself.3. The Applicability of Penalty Provisions when there is a Dispute about the Year of Expense Crystallization:The CIT(A) and the Tribunal both emphasized that a penalty under Section 271(1)(c) cannot be imposed merely because there is a dispute about the year in which an expense is allowable. The Tribunal cited the Bombay High Court's decision in Jayant and Chemicals P. Ltd. vs. CIT, which held that such disputes do not justify the imposition of a penalty. The Tribunal also referenced the Supreme Court's decision in Reliance Petro Products, which stated that making an incorrect claim does not amount to furnishing inaccurate particulars.4. The Relevance of Different Grounds for Initiating and Imposing Penalty:The assessee argued that the A.O. had initiated penalty proceedings for concealment but imposed the penalty for furnishing inaccurate particulars, which is contrary to law. The Tribunal agreed, referencing the Gauhati High Court's decision in Padma Ram Bharali vs. CIT, which held that initiating penalty on one ground and imposing it on another is not sustainable.5. The Legal Principles Guiding the Imposition of Penalty under Section 271(1)(c):The Tribunal reiterated the principles laid down by the Supreme Court in Reliance Petro Products, emphasizing that penalty provisions must be strictly construed. There must be a clear finding of concealment or furnishing of inaccurate particulars. In this case, the A.O. did not point out any falsity in the details submitted by the assessee. The Tribunal also noted that the Delhi High Court in CIT vs. Zoom Communications P. Ltd. distinguished between a genuine claim and a non-bona fide claim, concluding that the assessee's claim was bona fide.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that canceled the penalty under Section 271(1)(c). The Tribunal found that the assessee had not furnished inaccurate particulars of income and that the dispute was merely about the timing of the expense, not its legitimacy. The legal principles established by higher courts were applied to conclude that the penalty was not justified in this case.