2014 (12) TMI 604 - HC - Income Tax

Court upholds ITAT decision on penalty under Income Tax Act

The High Court upheld the ITAT's decision to delete penalties under section 271(1)(c) of the Income Tax Act for the deliberate but mistaken claims of ... Deletion of penalty us 271(1)(c) - inaccurate particulars furnished by assessee or not – Held that:- The Tribunal has rightly held that all the relevant material facts have been duly disclosed and, therefore, attraction of the provisions of section 271(1)(c) was not justifiable - on the basis of the advice given by the chartered accountant, such claim had been made by the assessee – in Btx Chemical P. Limited Versus Commissioner of Income-Tax [2006 (7) TMI 155 - GUJARAT High Court] it has been held that it could not be said that the assessee knew or had reason to believe that the claim made as revenue loss was untrue - assessee filed its return of income claiming deduction on the basis of its claim, lodged with the insurance company on account of loss and damage to its plant and machinery at replacement cost basis, and since the assessee had a bonafide belief on the basis of the advice received from it chartered accountant that loss occurred on the destruction of its plant and machinery, buildings, electric installments etc. was of revenue in nature and claim was made of total deduction of such amount – it could not said to be a case of concealment within the ambit and scope of section 271(1)(c) - assessee in respect of the reconstruction of the old Makarpura Unit, had made a claim u/s 80IB - The Tribunal has rightly held that there is no concealment nor any furnishing of inaccurate particulars – thus, the order of the Tribunal for not levying the penalty is upheld – Decided against revenue. Issues involved:1) Penalty under section 271(1)(c) of the Income Tax Act for claiming deduction under section 80IB despite ineligibility.2) Penalty under section 271(1)(c) for claiming excessive depreciation on electric fittings.3) Failure to prove bonafide claim for deduction under section 80IB and depreciation on electric fittings.4) Potential tax evasion due to undetected inadmissible claims if not scrutinized.5) Applicability of legal precedent from the High Court of Delhi to the case.Issue 1: Penalty under section 271(1)(c) for claiming deduction under section 80IB despite ineligibility:The Revenue challenged the deletion of penalty by the ITAT for the assessee's deliberate claim of deduction under section 80IB, despite not being eligible for it as it was not an SSI Unit. The Assessing Officer and CIT (Appeals) upheld the penalty, but the ITAT deleted it. The High Court noted that the claim was based on advice from a chartered accountant and held that mere disallowance of the claim does not justify the penalty. Citing relevant case law, the High Court emphasized the need for concealment or furnishing inaccurate particulars for penalty imposition, which was not evident in this case.Issue 2: Penalty under section 271(1)(c) for claiming excessive depreciation on electric fittings:The Revenue contested the deletion of penalty by the ITAT for the assessee's deliberate claim of excessive depreciation on electric fittings. The ITAT held that the penalty was not justified as all relevant facts were disclosed and there was no concealment or furnishing of inaccurate particulars. The High Court emphasized the importance of factual disclosure and bonafide belief, as advised by the chartered accountant, in such penalty proceedings, citing relevant case law to support its decision.Issue 3: Failure to prove bonafide claim for deduction under section 80IB and depreciation on electric fittings:The Revenue argued that the assessee failed to prove the bonafide nature of its claims for deduction under section 80IB and depreciation on electric fittings. However, the ITAT found that all relevant material facts were disclosed and no concealment or inaccurate particulars were evident. The High Court upheld the ITAT's decision, emphasizing the lack of justification for penalty imposition in the absence of concealment or furnishing inaccurate particulars.Issue 4: Potential tax evasion due to undetected inadmissible claims if not scrutinized:The Revenue raised concerns about potential tax evasion if the inadmissible claims of the assessee had gone undetected without scrutiny. However, the High Court noted that the penalty proceedings should be based on facts of concealment or inaccurate particulars, which were not established in this case. The High Court upheld the ITAT's decision to delete the penalty.Issue 5: Applicability of legal precedent from the High Court of Delhi to the case:The Revenue questioned the applicability of a legal precedent from the High Court of Delhi to the case. However, the High Court found that the Tribunal's decision was based on the facts of the case and the lack of concealment or inaccurate particulars. The High Court dismissed the tax appeal, emphasizing the importance of factual disclosure in penalty proceedings and the lack of substantial legal questions arising in this case.