2018 (12) TMI 1613 - AT - Income Tax

ITAT cancels penalty under section 271(1)(c) for disallowance of deduction.

Hari MotoCorp Ltd. Versus ACIT, Circle 12 (1) And DCIT Circle 11 (1) Versus Hero Motocorp Ltd. New Delhi

Hari MotoCorp Ltd. Versus ACIT, Circle 12 (1) And DCIT Circle 11 (1) Versus Hero Motocorp Ltd. New Delhi - TMI Issues involved:1. Validity of penalty under section 271(1)(c) for disallowance of deduction under section 80IA.2. Jurisdiction of the Assessing Officer in passing penalty order.3. Allegation of furnishing inaccurate particulars of income by the appellant.4. Confirmation of disallowance of deduction under section 80IA by the CIT(A).5. Debatable nature of the addition made leading to the penalty.Detailed Analysis:1. The appellant challenged the penalty imposed under section 271(1)(c) for disallowance of deduction under section 80IA for the assessment year 2003-04. The CIT(A) upheld the penalty, leading to the appeal before the ITAT. The appellant contended that the penalty was beyond jurisdiction as there was no satisfaction recorded regarding concealment or furnishing inaccurate particulars of income in the assessment order. The ITAT noted that the issue of disallowance under section 80IA was debatable, as evidenced by the Hon'ble Delhi High Court admitting a question of law on the same matter. Citing precedents, the ITAT concluded that the addition was debatable, leading to the deletion of the penalty.2. The jurisdiction of the Assessing Officer in passing the penalty order was questioned by the appellant. The ITAT considered the legal aspect of jurisdiction and found that the absence of recorded satisfaction regarding concealment or inaccurate particulars of income in the assessment order rendered the penalty order beyond jurisdiction. The ITAT relied on previous court decisions to support the view that the penalty was not sustainable due to the debatable nature of the addition under section 80IA.3. The allegation of furnishing inaccurate particulars of income by the appellant was a crucial aspect of the case. The CIT(A) held that the appellant had furnished inaccurate particulars by notionally booking profit at a specific rate. However, the appellant argued that the disallowance was based on a bona fide difference of opinion and not on incorrect facts. The ITAT reviewed the contentions and found that the issue of booking profit was debatable, as supported by the admission of a question of law by the Hon'ble High Court. Consequently, the ITAT allowed the appellant's appeal and deleted the penalty.4. The confirmation of the disallowance of deduction under section 80IA by the CIT(A) was a pivotal factor in the penalty imposition. The appellant contested the CIT(A)'s decision, highlighting the debatable nature of the disallowance. The ITAT considered the precedents and the admission of a question of law by the Hon'ble High Court, leading to the conclusion that the disallowance was indeed debatable. As a result, the ITAT allowed the appeal and set aside the penalty.5. The debatable nature of the addition made, which led to the penalty, was a recurring theme in the ITAT's analysis. The ITAT emphasized the importance of the debatable aspect, as evidenced by the admission of questions of law by the Hon'ble High Court. Relying on legal precedents and the principle of debatability, the ITAT concluded that the penalty was not sustainable and proceeded to delete it, ultimately allowing the appeal filed by the assessee for the assessment year 2003-04.