2018 (2) TMI 1633 - AT - Income Tax

Tribunal overturns deletion of penalty for wrong tax claims, remands for fair assessment

The Tribunal set aside the deletion of penalty under section 271(1)(c) by the Commissioner of Income Tax (Appeals). It found that the penalty was ... Penalty levied u/s. 271(1)(c) - addition u/s 14A - Held that:- As far as levy of penalty on addition u/s. 14A is concerned, the same does not arise as the computation of income under normal provisions was less than the tax computed u/s. 115J. As per the Board Circular referred, the penalty is not warranted on this amount. Hence, to that extent, the action of AO cannot be accepted. Addition made under the provisions of Section 115JB, we are unable to examine whether the claim was deliberate or not? Assessee admitted that it made a ‘conscious claim’. Except stating the same and relying on various case law, no details are filed to examine. In these circumstances, we are unable to come to a conclusion whether it is a bonafide claim or deliberate claim to avoid payment of tax u/s. 115JB. The order of Ld.CIT(A) does not throw any light on these aspects. Devoid of facts, the case law cannot be applied. It is trite law that the case law will apply only based on facts in which it was rendered. In the absence of discussion or examination of facts, it is not possible to adjudicate only on principles of law. In view of that, we hereby set aside the order of AO and CIT(A) on this issue and restore the issue to the file of AO to consider the same afresh on the issues stated above and give clear findings. Issues:- Appeal against the deletion of penalty under section 271(1)(c) of Rs. 2,34,05,562/- by the Commissioner of Income Tax (Appeals).- Disallowance u/s 14A of Rs. 7,98,545/- and computation of Book Profits u/s 115JB of Rs. 7,72,20,000/- made during assessment proceedings.- Contention regarding excess penalty levied and rejection of claims by the Assessing Officer.- Consideration of various legal aspects and case laws in determining the justification for the penalty.Analysis:1. The Revenue appealed against the deletion of the penalty under section 271(1)(c) of Rs. 2,34,05,562/- by the Commissioner of Income Tax (Appeals). The Revenue contended that the assessee made deliberate but wrong claims leading to concealment, while the assessee argued that mere disallowance of claims does not warrant a penalty.2. The disallowance under section 14A of Rs. 7,98,545/- was made due to the assessee's investments in sister concerns and the claim of interest on loans. The Assessing Officer disallowed a portion of the interest claimed as the source of investments was not adequately substantiated. The computation of Book Profits under section 115JB of Rs. 7,72,20,000/- was also challenged as the assessee's claim for deduction was rejected.3. The assessee accepted the disallowances/additions made during assessment but contested the penalty levied under section 271(1)(c). The assessee argued that there was an excess levy of Rs. 1,17,02,781/- and provided explanations that were not fully considered by the authorities.4. The Commissioner of Income Tax (Appeals) deleted the penalty after considering the submissions and legal aspects. The Commissioner found that the penalty was not justified as there was no concealment of income or furnishing of inaccurate particulars. Various case laws were cited to support the decision, emphasizing that mere wrong claims with full disclosure do not amount to concealment.5. The Tribunal set aside the orders of the Assessing Officer and Commissioner of Income Tax (Appeals) regarding the penalty. It was noted that the Assessing Officer did not consider the explanations provided by the assessee, and the penalty on the addition under section 14A was not warranted as per the Board Circular. The issue of penalty on the addition under section 115JB was remanded to the Assessing Officer for further examination based on the facts and submissions provided.6. The Tribunal directed the Assessing Officer to reevaluate the penalty considering all relevant aspects and giving the assessee a fair opportunity to present their case. The order of the Commissioner of Income Tax (Appeals) deleting the penalty was set aside, and the matter was restored for fresh consideration.This detailed analysis outlines the key issues raised in the legal judgment and the comprehensive examination of each issue by the authorities involved.