Tax penalty for disallowed claim under section 271(1)(c) deleted by ITAT. Legal issue, no concealment.

The ITAT upheld the decision of the ld. Commissioner of Income Tax (Appeals) to delete the penalty imposed under section 271(1)(c) for disallowance of provision for excise duty payable. It was held that the disallowance under section 43B is a legal issue and does not warrant a penalty. The ITAT emphasized that the assessee disclosed all necessary particulars, ruling out any concealment of income or furnishing of inaccurate particulars. The appeal was dismissed, citing case law precedent that a disallowed claim does not automatically lead to a penalty under the mentioned section.

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Issues:
Levy of penalty under section 271(1)(c) for disallowance of provision for excise duty payable.

Analysis:
The appeal pertains to the deletion of penalty u/s. 271(1)(c) of the Act amounting to Rs. 10,97,775/- by the ld. Commissioner of Income Tax (Appeals). The case involved the disallowance of provision for excise liability expenses amounting to Rs. 30,00,000/- in the assessment year 2005-06. The Assessing Officer disallowed the provision for excise liability, citing section 43B that allows expenses only on actual payment. The Assessing Officer levied the penalty under section 271(1)(c) for alleged concealment of income. The ld. Commissioner of Income Tax (Appeals) deleted the penalty, emphasizing that the disallowance under section 43B is a legal issue, and no penalty is leviable on legal matters. The ld. Commissioner relied on the decision in the case of Reliance Petroproducts Pvt. Ltd. where it was held that a claim not sustainable in law does not amount to furnishing inaccurate particulars. The ld. Commissioner also cited the case of CIT vs. Varun Finstock Pvt. Ltd. to support the decision. It was clarified that the penalty order is independent of the assessment order, and the mere confirmation of addition does not automatically warrant a penalty.

Upon hearing both parties, the ITAT upheld the decision of the ld. Commissioner of Income Tax (Appeals). The ITAT concurred that the necessary particulars were disclosed by the assessee, and there was no concealment of income or furnishing of inaccurate particulars. The ITAT referenced the case law of Reliance Petroproducts Pvt. Ltd. to emphasize that the disallowance of a claim does not justify the imposition of a penalty under section 271(1)(c). Therefore, the ITAT found no fault in the decision of the ld. Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal.

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