2020 (3) TMI 1168 - AT - Income Tax

Tribunal overturns penalty under Income Tax Act, finding Assessee's disclosure genuine and expenses legitimate.

Arrow Digital Pvt. Ltd. Versus D.C.I.T, Cirle-1 (1) (1) Ahmedabad.

Arrow Digital Pvt. Ltd. Versus D.C.I.T, Cirle-1 (1) (1) Ahmedabad. - [2020] 80 ITR (Trib) 360 (ITAT [Ahm]) Issues Involved:1. Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.2. Confirmation of penalty by the Commissioner of Income Tax (Appeals).3. Assessment of penalty for furnishing inaccurate particulars of income.Analysis:Issue 1: Appeal against Penalty Imposed under Section 271(1)(c)The appeal was filed by the Assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Assessee contended that the penalty upheld by the Commissioner of Income Tax (Appeals) was illegal, unlawful, and against the principles of natural justice. The Assessee raised various grounds challenging the imposition of the penalty, citing errors in law and facts by the authorities.Issue 2: Confirmation of Penalty by Commissioner of Income Tax (Appeals)The Commissioner of Income Tax (Appeals) confirmed the penalty imposed by the Assessing Officer, stating that the Assessee's claim for expenses was not bona fide and that the claim made was incorrect in law and mala fide. The Commissioner referred to judicial precedents and held that the Assessee failed to substantiate its claim, leading to the confirmation of the penalty under section 271(1)(c) of the Act.Issue 3: Assessment of Penalty for Furnishing Inaccurate Particulars of IncomeThe Tribunal analyzed the two main aspects of the penalty levied on the Assessee. Firstly, regarding the provision for gratuity expenses, the Tribunal found that the Assessee did not deliberately furnish inaccurate particulars of income, as the disclosure was made in the tax audit report. The Tribunal referred to a Supreme Court judgment to support its decision that the penalty was not justified in this case. Secondly, concerning the disallowance of exhibition expenses, the Tribunal held that the Assessee did not deliberately furnish inaccurate particulars of income, as the genuineness of the expenses claimed was not found incorrect by the authorities. The Tribunal emphasized that the claim made by the Assessee, though disallowed, did not amount to furnishing inaccurate particulars of income.In conclusion, the Tribunal allowed the appeal filed by the Assessee, ruling that the penalty under section 271(1)(c) of the Act was not justified in the given facts and circumstances.