2018 (10) TMI 1439 - AT - Income Tax

Tribunal Overturns Penalties for Tax Non-compliance

The Tribunal allowed the appeal challenging penalty orders under section 271(1)(c) of the Income Tax Act for the assessment year 2009-10. The penalties ... Penalty u/s 271(1)(c) - addition on account of disallowances made in relation to the alleged incorrect claim of deduction u/s 36(i)(viia) and disallowance on account of alleged incorrect claim of deduction of interest paid by the assessee to the head office - Held that:- Perusal of the aforesaid substantial questions of law framed by Hon’ble High Court of Delhi in the appeal against the assessment order on the basis of which this penalty has been levied shows that it is still debatable if the disallowance of ₹ 4,88,61,772/- u/s 36(i)(viia) and disallowance of the interest payment made by the assessee to its head office by following the special bench order in case of ABN AMBRO BANK vs. ADIT (2010 (12) TMI 340 - CALCUTTA HIGH COURT) is sustainable or not. So when the issue as to disallowances is still debatable no penalty can be levied and as such penalty imposed in this case is liable to be deleted on this score only. Even on merit when we examine the assessment order as well as penalty order, the revenue has not come up with any allegation that there is concealment of income or furnishing of inaccurate particulars of income rather simple allegation made by the revenue is that the assessee has claimed incorrect deduction u/s 36(i)(viia) out of which ₹ 4,88,61,722/- has been disallowed and that the assessee has claimed deduction on account of interest payment of ₹ 32,20,00,000/- paid to its head office which has also been disallowed. Mere claiming of deductions under the relevant provisions of law and as per RBI Guidelines does not and cannot amount to furnishing of inaccurate particulars of income. More over it is not case of the revenue that the assessee has not claimed the deductions as per law nor it is claim of the revenue that the assessee has made a double claim of such deductions. - penalty levied by AO and confirmed by CIT(A) is not sustainable in the eyes of law - Decided in favour of assessee. Issues:1. Validity of penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment year 2009-10.2. Alleged errors in sustaining penalties related to interest payments and erroneous interpretation of provisions.3. Lack of approval for imposing penalty under section 274(2)(b) of the Act.4. Justification for sustaining penalty for concealment of income without proper reasoning.Issue 1: The appeal sought to set aside the penalty order dated 13.03.2014 passed by the Commissioner of Income-tax (Appeals)-XXV, New Delhi, affirming the penalty order dated 30.11.2012 under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10. The appellant, a non-resident banking company, challenged the penalty order on various grounds, including the argument that the penalty order was barred by limitation and lacked proper reasoning for sustaining the penalties imposed.Issue 2: The appellant contested the penalties imposed for interest payments and an erroneous interpretation of provisions under section 36(i)(viia) of the Act. The appellant argued that the penalties were unjustified as there was no finding of concealment of income or furnishing inaccurate particulars by the appellant company. The appellant cited legal precedents to support their claim that the penalties were arbitrary and should be struck down.Issue 3: The appellant raised concerns regarding the lack of approval for imposing the penalty under section 274(2)(b) of the Act. The appellant argued that as such approval was mandatory for passing any order for imposing a penalty, the penalty order sustained by the Commissioner of Income-tax (Appeals) was void ab initio and invalid in the eyes of the law, thus should be quashed.Issue 4: The appellant contended that the penalty for concealment of income was unjustified as there were no proper reasons provided for sustaining the penalty. The appellant argued that the penalty was imposed without proper application of mind and purely based on conjectures and surmises. The appellant emphasized that no penalty is imposable on debatable issues, as per established legal principles.The Tribunal, after considering the arguments presented by both parties and examining the relevant legal provisions and precedents, concluded that the penalties imposed were not sustainable in the eyes of the law. The Tribunal highlighted that the issues related to disallowances were still debatable and pending before the Hon'ble Delhi High Court. Additionally, the Tribunal noted that the revenue failed to prove that the appellant furnished inaccurate particulars of income while claiming deductions. Consequently, the appeal filed by the appellant was allowed, and the penalty order was set aside.