2013 (6) TMI 246 - AT - Income Tax

Appellate Tribunal overturns penalty under Income Tax Act for inaccurate particulars, emphasizes judicial discretion

The Appellate Tribunal set aside the penalty imposed on the assessee under section 271(1)(c) of the Income Tax Act for inaccurate particulars and ... Penalty u/s 271(1)(c) - 1/5th of expenditure related to project report (market survey and legal charges for drafting agreement) disallowed as the amount was incurred after commencement of assessee’s business and no new industrial undertaking had been set up or expanded - Held that:- As decided in Price Waterhouse Coopers Pvt. Ltd. vs. C.I.T. and Anr. [2012 (9) TMI 775 - SUPREME COURT] absence of due care does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Also see CIT vs. Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein held that the law laid down in the Dilip N Sheroff case (2007 (5) TMI 198 - SUPREME Court) as to the meaning of word ‘concealment’ and ‘inaccurate’ continues to be a good law because what was overruled in the Dharmender Textile case [ [2008 (9) TMI 52 - SUPREME COURT ] was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon’ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not acceptedby the Assessing Officer for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature. Thus the levy of penalty in this case is not justified. In favour of assessee. Issues:Penalty under section 271(1)(c) of the Income Tax Act for inaccurate particulars and concealment of income.Analysis:The case involved an appeal against the order of the Commissioner of Income Tax (Appeals) regarding the penalty imposed under section 271(1)(c) of the Income Tax Act. The Assessing Officer disallowed a claim made by the assessee related to expenditure incurred for project reports and legal charges. The Commissioner of Income Tax (Appeals) upheld the disallowance, stating that the expenditure was capital in nature and not allowable under section 37 of the Income Tax Act. The Commissioner noted that the claim was deliberately made by the assessee, despite being aware of the legal position. The Commissioner relied on various legal precedents to support the decision.Upon hearing the appeal, the Appellate Tribunal found that the expenditure claimed by the assessee was related to capital fields and not allowable as revenue expenses. The Tribunal considered the argument that the assessee had made a full disclosure of the claim, and thus, there was no concealment or furnishing of inaccurate particulars. The Tribunal referred to legal judgments, including one from the Supreme Court, to support its decision that the penalty was not justified in this case.The Tribunal emphasized that the imposition of a penalty for failure to carry out a statutory obligation should be based on deliberate defiance of the law or contumacious conduct. It highlighted the importance of exercising discretion judicially when imposing penalties. The Tribunal also referred to another Supreme Court decision to clarify the meaning of 'concealment' and 'inaccurate' in the context of penalty under section 271(1)(c) of the Income Tax Act.Based on the discussions and legal precedents cited, the Tribunal concluded that the levy of penalty in this case was not justified. Therefore, the Tribunal set aside the orders of the lower authorities and deleted the penalty imposed on the assessee. As a result, the appeal filed by the assessee was allowed.In summary, the judgment revolved around the penalty imposed under section 271(1)(c) of the Income Tax Act for inaccurate particulars and concealment of income. The Tribunal analyzed the nature of the expenditure claimed by the assessee, the disclosure made, and the legal precedents to determine the justification for the penalty. Ultimately, the Tribunal found that the penalty was not warranted in this case and ruled in favor of the assessee.