2011 (7) TMI 1357 - AT - Income Tax

Tribunal upholds CIT(A) decision to delete penalties under section 271(1)(c) for various disallowances.

The Tribunal upheld the CIT(A)'s decision to delete penalties under section 271(1)(c) in a case involving various disallowances. The penalties were ... - Issues Involved:1. Deletion of penalty u/s 271(1)(c) for disallowance of expenditure incurred at Business Centre.2. Deletion of penalty u/s 271(1)(c) for disallowance of depreciation on premises.3. Deletion of penalty u/s 271(1)(c) for disallowance of prior period expenses.4. Deletion of penalty u/s 271(1)(c) for disallowance u/s 14A.5. Deletion of penalty u/s 271(1)(c) for disallowance of bad debts.Summary:1. Deletion of penalty u/s 271(1)(c) for disallowance of expenditure incurred at Business Centre:The assessee treated the compensation received from letting out premises as 'business income' and claimed expenses accordingly. The A.O. assessed it as 'income from house property' and disallowed the expenses, leading to a penalty u/s 271(1)(c). The CIT(A) deleted the penalty, noting that the assessee had disclosed all facts and the issue was debatable. The Tribunal upheld this view, emphasizing that penalty cannot be levied on debatable issues and when full particulars are disclosed.2. Deletion of penalty u/s 271(1)(c) for disallowance of depreciation on premises:The A.O. disallowed depreciation claimed on premises by treating the income as 'house property income' instead of 'business income.' The CIT(A) deleted the penalty, stating that the genuineness of expenses was not disputed and the issue was a matter of opinion. The Tribunal agreed, noting that no penalty was levied in similar cases in other assessment years, indicating a change of opinion rather than concealment of income.3. Deletion of penalty u/s 271(1)(c) for disallowance of prior period expenses:The A.O. disallowed prior period expenses claimed by the assessee, leading to a penalty. The CIT(A) deleted the penalty, noting that the details were disclosed in audited accounts and tax audit report, and the liability crystallized during the year. The Tribunal upheld this, agreeing that there was no concealment of income or filing of inaccurate particulars.4. Deletion of penalty u/s 271(1)(c) for disallowance u/s 14A:The A.O. disallowed interest expenditure u/s 14A related to tax-free income, leading to a penalty. The CIT(A) deleted the penalty, noting that the assessee had provided an explanation and there was no concealment of income. The Tribunal upheld this, citing that no such disallowance was made in other assessment years and penalty cannot be levied on disallowance u/s 14A.5. Deletion of penalty u/s 271(1)(c) for disallowance of bad debts:The A.O. disallowed bad debts claimed by the assessee, leading to a penalty. The CIT(A) deleted the penalty, noting that the details were disclosed and the disallowance was due to the amounts not pertaining to debtors. The Tribunal upheld this, stating that the disallowance did not justify penalty as there was no concealment or inaccurate particulars.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of penalties u/s 271(1)(c) on all grounds, emphasizing full disclosure by the assessee and the debatable nature of the issues.