2019 (5) TMI 281 - AT - Income Tax

Tribunal upholds deletion of penalties for tax assessment years, emphasizes need for Assessing Officer's satisfaction

The Tribunal dismissed the Revenue's appeals regarding the deletion of penalties under section 271(1)(c) of the Income-tax Act for the assessment years ... Penalty u/s 271(1)(c) - assessee contented as no notice u/s 274 r.w.s. 271(1)(c) was issued along with assessment order - no prima-facie satisfaction recorded by AO - HELD THAT:- As no copy of such notice issued has been produced by the Revenue. We find that the Tribunal in the case of Shambhu Dayal [2015 (11) TMI 1776 - ITAT DELHI] relied on the decision of Madhushree Gupta Vs. Union of India [2009 (7) TMI 38 - DELHI HIGH COURT] as held absence of any prima-facie satisfaction recorded by the AO for initiation of penalty in the assessment order, the penalty levied by the AO is without any jurisdiction and void ab-initio, therefore, order of the learned Assessing Officer passed under 271(1)(c ) of Act is quashed and the ground of the assessee is allowed Penalty u/s 271(1)(c ) - addition of depreciation or additional appreciation - remaining two claims relate to disallowance of interest on capital work in progress and disallowance of research and development expenses - CIT(A) pointed out that regarding the depreciation the assessee has fully disclosed all the particulars of claim not only in the statement of income but in the audited balance sheet and 3CD reports also. In respect of the capital work-in-progress and research and development expenses also all details have been filed by the assessee in notes to account annexed to balance sheet - HELD THAT:- We concur with the observation of CIT(A) that merely rejection of the claim may not invite the assessee to penalty under section 271(1)(c) of the Act. The Ld. DR could not controvert the observation of the Ld. CIT(A). In our opinion, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any infirmity in the same and accordingly, we uphold the same. Accordingly, the ground of the appeal is dismissed. - Decided in favour of assessee. Issues Involved:1. Deletion of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment years 2007-08 and 2008-09.Issue-wise Detailed Analysis:1. Deletion of Penalty for Assessment Year 2007-08:The Revenue appealed against the deletion of a penalty amounting to Rs. 3,66,63,680/- imposed under section 271(1)(c) of the Act. The assessment was completed with several disallowances, including research and development expenditure, extraordinary capital receipt, depreciation on software, and more. The Assessing Officer (AO) issued a show-cause notice for penalty, concluding that the assessee furnished inaccurate particulars of income, leading to the penalty imposition. However, the CIT(A) deleted the penalty, citing the absence of satisfaction for initiation of penalty proceedings in the assessment order, which is a prerequisite for assuming jurisdiction for penalty levy.The Tribunal upheld the CIT(A)'s decision, referencing the requirement for the AO to record satisfaction for initiating penalty proceedings in the assessment order. The Tribunal cited the case of Shambhu Dayal and the Delhi High Court's decision in Madhushree Gupta Vs. Union of India, emphasizing that the satisfaction must be apparent from the order itself. The Tribunal found no evidence of such satisfaction or notice under section 274 read with section 271(1)(c) being issued, thus dismissing the Revenue's appeal.2. Deletion of Penalty for Assessment Year 2008-09:The Revenue also appealed against the deletion of a penalty amounting to Rs. 2,06,77,160/- for the assessment year 2008-09. The assessment included disallowances related to depreciation, interest on capital work in progress, and research and development expenditure. The AO levied the penalty for furnishing inaccurate particulars of income, but the CIT(A) deleted it, noting that the AO had initiated penalty proceedings only for the addition under section 14A, which was later deleted by the CIT(A).The CIT(A) observed that the assessee had disclosed all particulars of claims in the financial statements and made claims under a bona fide belief. The Tribunal concurred, referencing the Supreme Court's decision in CIT Vs. Reliance Petroproducts Private Limited, which held that merely making a disallowed claim does not attract penalty under section 271(1)(c). The Tribunal found the CIT(A)'s decision well-reasoned and upheld it, dismissing the Revenue's appeal.Conclusion:Both appeals by the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions to delete the penalties for both assessment years, emphasizing the necessity of recording satisfaction for initiating penalty proceedings in the assessment order and recognizing bona fide claims made by the assessee.