2014 (1) TMI 893 - AT - Income Tax

Tribunal dismisses Revenue's appeal on disallowance, emphasizes genuine expenses. Bonafide explanations lead to penalty deletion.

The Tribunal dismissed the Revenue's appeal on disallowance under sections 40(a)(ia) and 14A, emphasizing genuine expenses and no penalty for technical ... Disallowance u/s 14A and u/s 40a(ia) of the Act – Held that:- Assessee contended that they had made a voluntary surrender of all the disallowable expenses on his own - all the facts and figures were correctly disclosed and this is not a case of furnishing of inaccurate particulars - On examination of the details furnished, the assessee had suo-moto agreed to the technical disallowance – Relying upon CIT vs. Reliance Petro Products P. Ltd.[2010 (3) TMI 80 - SUPREME COURT] - The CIT(A) held that the assessee has furnished all the required details and that hence no penalty can be levied on technical/legal disallowances u/s 14A or u/s 40(a)(ia) – the order of the CIT(A) upheld – Decided against Revenue. Penalty u/s 271(1)(c) of the Act - Addition made on liquidated damages – Held that:- The CIT(A) should have deleted the penalty based on the same reasons given for deleting the penalty in the case of disallowance u/s 40(a)(ia) and u/s 14A - All the facts and figures regarding the claim were before the Revenue authorities and it is not a case of bogus claim - The claim of the assessee that it is inadvertent computation mistake through oversight appears to be a bonafide explanation - the facts do not suggest that this is not an inadvertent mistake as explained by the assessee - any excess or short provision would be reversed in the subsequent year - The decision in CIT vs. Reliance Petro Products P. Ltd. [2010 (3) TMI 80 - SUPREME COURT] and in Price Waterhouse Coopers P. Ltd. vs CIT [2012 (9) TMI 775 - SUPREME COURT] followed – Penalty levied by the CIT(A) set aside – Decided in favour of Assessee. Issues Involved:Cross Appeals against the Order of the Ld.CIT(A)- XXVII, New Delhi pertaining to the AY 2008-09.Detailed Analysis:1. Disallowance u/s 40(a)(ia) and u/s 14A of the Act:The Ld.CIT(A) confirmed legal disallowances made by the AO, stating that no inaccurate particulars were filed regarding deductions. The AO disallowed expenses under these sections, but the Ld.CIT(A) found the expenses genuine and allowed relief based on case laws. The Tribunal agreed with the Ld.CIT(A) that no penalty can be levied on technical/legal disallowances under these sections. The Revenue's appeal on this ground was dismissed.2. Confirmation of Penalty on Part Disallowance of Liquidated Damages:The AO confirmed penalty on the part disallowance of liquidated damages. The Ld.CIT(A) upheld the penalty, stating the explanation provided by the assessee was not bonafide. The Tribunal noted that the issue was about the quantification of liquidated damages. Considering the marginal error in quantification and the bonafide explanation provided by the assessee, the Tribunal found that the penalty should have been deleted, similar to the disallowance u/s 40(a)(ia) and u/s 14A. Citing relevant case laws, the Tribunal allowed the appeal of the assessee and dismissed that of the Revenue.In conclusion, the Tribunal allowed the appeal of the assessee and dismissed that of the Revenue, emphasizing the importance of bonafide explanations and inadvertent errors in tax matters.