2015 (5) TMI 41 - AT - Income Tax

Appellate Tribunal cancels penalty under Income Tax Act citing lack of evidence for intentional concealment

Income-tax Officer Versus M/s. Lexus India Ltd.

Income-tax Officer Versus M/s. Lexus India Ltd. - TMI Issues Involved:1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.2. Furnishing inaccurate particulars of income.3. Concealment of taxable income by claiming non-allowable expenses.Issue-wise Detailed Analysis:1. Deletion of Penalty under Section 271(1)(c):The Assessing Officer (AO) challenged the correctness of the CIT(A)'s order, which deleted the penalty of Rs. 8,30,865/- imposed under section 271(1)(c) for the assessment year 2004-05. The AO argued that the assessee furnished inaccurate particulars of income and concealed taxable income by claiming non-allowable expenses such as loss on sale of a plot, car hire charges, and excessive depreciation on software.2. Furnishing Inaccurate Particulars of Income:During assessment proceedings, the AO noted that the assessee sold a plot for Rs. 14,00,000/- against a purchase price of Rs. 28.38 lacs. The assessee explained the sale was due to the need to comply with UPSIDC guidelines and the decision to set up the project in Dehradun instead. The AO rejected this explanation based on an Inspector's report suggesting a higher market price, leading to the disallowance of the capital loss. Additionally, the AO disallowed car hire charges and depreciation on software due to lack of supporting documents and usage duration, respectively. The AO imposed a penalty for concealment and furnishing inaccurate particulars.3. Concealment of Taxable Income by Claiming Non-Allowable Expenses:The CIT(A) deleted the penalty, observing that penalty proceedings are distinct from assessment proceedings and that findings in assessment proceedings are not conclusive. The CIT(A) emphasized that the burden of proof lies on the assessee to establish the presumption of bona fide explanations, which can be discharged by direct or circumstantial evidence. The CIT(A) also noted that mere disallowance of expenses does not automatically justify penalty imposition unless there is conscious concealment or furnishing of inaccurate particulars. The CIT(A) concluded that the assessee's conduct and explanations did not indicate any intentional act of concealment or furnishing inaccurate particulars.Appellate Tribunal's Observations:The Tribunal upheld the CIT(A)'s decision, noting that the Inspector's report alone was insufficient to disregard the sale consideration supported by sale deeds. The Tribunal found no basis for penalty imposition regarding the long-term capital loss, car hire charges, or depreciation disallowance. The Tribunal emphasized that incorrect claims, if bona fide, do not warrant penalty under section 271(1)(c).Conclusion:The Tribunal confirmed the CIT(A)'s findings, concluding that there was no case of concealment or furnishing inaccurate particulars by the assessee. The appeal by the AO was dismissed, and the penalty under section 271(1)(c) was canceled.Order Pronounced:The order was pronounced in the open court on 27th March, 2015.