2017 (12) TMI 748 - AT - Income Tax

Tribunal Upholds Deletion of Penalty in Income Tax Case

The Tribunal upheld the Ld.CIT(A)'s decision to delete the penalty imposed under sections 37(4) and 40A(5) of the Income Tax Act, 1961. The penalty was ... Penalty u/s 271(1)(c) - disallowance of expenses - Held that:- As the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty u/s 271(1)(c). If we accept the contention of Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty u/s 271(1)(c). See CIT versus Reliance Petro Products Private Limited [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of assessee. Issues:1. Deletion of penalty imposed under sections 37(4) and 40A(5) of the Income Tax Act, 1961.2. Consideration of penalty imposition after the final order of Hon'ble ITAT.3. Time-barred penalty proceedings.4. Legality of Ld.CIT(A)'s order.Analysis:1. The penalty appeal involved the deletion of a penalty of Rs. 20,72,130 imposed by the AO under sections 37(4) and 40A(5) of the Income Tax Act, 1961. The Ld.CIT(A) deleted the penalty after considering various case laws and the history of additions made by the AO, which were mostly deleted by the Hon'ble Tribunal in a previous order. The Ld.CIT(A) found that the penalty proceedings were time-barred under section 275(1) of the IT Act, as the penalty was imposed after the final order of the ITAT. The Ld.CIT(A) concluded that the penalty was not justified as the appellant had not concealed any income, and the penalty was therefore quashed.2. The issue of penalty imposition after the final order of the Hon'ble ITAT was raised by the Ld.CIT(A) in the context of the penalty being time-barred under section 275(1) of the IT Act. The Ld.CIT(A) noted that the AO should have imposed the penalty while giving effect to the order of the Tribunal in 1994, and the penalty proceedings initiated in 2014 were beyond the period of limitation. The Ld.CIT(A) considered the facts and circumstances of the case, along with relevant case law, and decided to delete the penalty based on the delay in imposing it.3. The Ld.CIT(A) also addressed the issue of time-barred penalty proceedings under section 275(1) of the IT Act. The Ld.CIT(A) agreed with the appellant's argument that the penalty proceedings were time-barred as the Commissioner had received the ITAT order in 1995, and the penalty was imposed in 2014. The Ld.CIT(A) found merit in the appellant's claim that the penalty was imposed beyond the statutory limitation period, and therefore, the penalty was deleted on this ground.4. The legality of the Ld.CIT(A)'s order was challenged by the revenue in the appeal before the Tribunal. The revenue contended that the penalty was justified based on the subsequent order passed by the Tribunal after the High Court's decision. However, the Tribunal upheld the Ld.CIT(A)'s order, citing the decision of the Hon'ble Supreme Court in a relevant case, which emphasized that making an incorrect claim in law does not amount to furnishing inaccurate particulars. The Tribunal dismissed the revenue's appeal, affirming the deletion of the penalty by the Ld.CIT(A) based on the legal principles discussed.In conclusion, the Tribunal dismissed the revenue's appeal, upholding the Ld.CIT(A)'s decision to delete the penalty imposed under sections 37(4) and 40A(5) of the Income Tax Act, 1961, considering the penalty proceedings as time-barred and finding no infirmity in the Ld.CIT(A)'s findings based on legal precedents and the facts of the case.