2016 (9) TMI 906 - AT - Income Tax

Tribunal rules in favor of assessee in penalty appeals under Income Tax Act

The Tribunal ruled in favor of the assessee in three appeals concerning penalties under Section 271(1)(c) of the Income Tax Act for AYs 1995-96, 2002-03, ... Penalty u/s.271(1)(c) - denial of claim of deduction u/s.80IB and u/s.80HHC & 80IA - Held that:- There is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010 (3) TMI 80 - SUPREME COURT ), wherein the Hon’ble Apex Court has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.- Decided in favour of assessee Issues Involved:1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years (AYs) 1995-96, 2002-03, and 2004-05.Issue-wise Detailed Analysis:1. AY 1995-96:The primary issue was the levy of penalty under Section 271(1)(c) due to disallowances and denial of deductions. The disallowances included bad debts, depreciation, and deduction under Section 80IA. The Assessing Officer (AO) held that the assessee furnished inaccurate particulars of income, leading to a penalty of Rs. 15,37,090. The Commissioner of Income Tax (Appeals) [CIT(A)] granted partial relief but confirmed the penalty on bad debts, depreciation, and deduction under Section 80IA.The Tribunal noted that the addition on account of bad debts was deleted by CIT(A) following the Tribunal's direction, making the penalty on bad debts unsustainable. For depreciation and deduction under Section 80IA, the Tribunal referred to a previous decision where similar penalties were deleted. It concluded that the assessee had provided all necessary documents and there was no evidence of false information or concealment of income. Citing the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd., the Tribunal held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars. Consequently, the penalty was deleted.2. AY 2002-03:The issue was the penalty for disallowances related to deductions under Sections 80HHC and 80IB, and dividend income. The AO imposed a penalty of Rs. 2,23,424, stating that the assessee furnished inaccurate particulars by claiming deductions on interest and miscellaneous income. CIT(A) upheld the penalty, arguing that the claims were not genuine or bonafide.The Tribunal observed that the assessee had filed all relevant documents and there was no evidence of inaccurate particulars or concealment. It reiterated that an unsustainable claim does not equate to furnishing inaccurate particulars, referencing the Supreme Court's judgment in Reliance Petroproducts. The Tribunal directed the deletion of the penalty.3. AY 2004-05:The issue was similar to AY 2002-03, involving penalties for disallowances related to deductions under Sections 80HHC and 80IB. The AO imposed a penalty of Rs. 11,99,361. The Tribunal noted that the facts and circumstances were identical to AY 2002-03. Following the same reasoning and the Supreme Court's judgment, the Tribunal directed the deletion of the penalty.Conclusion:In all three appeals, the Tribunal concluded that the assessee had not furnished inaccurate particulars or concealed income. The penalties under Section 271(1)(c) were deleted, relying on the Supreme Court's judgment that making an unsustainable claim does not amount to furnishing inaccurate particulars. All three appeals were allowed in favor of the assessee.