2022 (2) TMI 389 - AT - Income Tax

Tribunal rules for assessee, no penalty under Section 271(1)(c) justified. Importance of debatable issues highlighted.

Addl. CIT, Special Range-4, New Delhi. Versus Hindustan Coca Cola Beverages Pvt. Ltd.

The Tribunal dismissed the Revenue's appeal, ruling in favor of the assessee. It was established that the assessee did not furnish inaccurate particulars ... Penalty u/s 271(1)(c) - disallowance of of “non-compete fee” amortized in its returns of income supported with computation sheet - HELD THAT:- When the claim lodged by the assessee company, in its return of income on the basis of its audited financials have been rejected by the lower authorities while taking different view than the assessee, no question of furnishing inaccurate particulars arises. Following the decision rendered in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.[2010 (3) TMI 80 - SUPREME COURT] we are of the considered view that in this case, there was no occasion for the assessee to furnish in accurate particulars of its income who has lodged a bona fide claim qua the deduction and writing of the value of signages and ice boxes on the basis of its audited financials which has been rejected by the revenue authorities by taking different view and in these circumstances provisions contained u/s 271(1)(c) are not attracted. Assessing Officer has nowhere brought on record if assessee has furnished inaccurate particulars of income, at the most, the act of the assessee may be termed as “filing of incorrect claim” which does not attract the penal provisions contained under Section 271(1)(c) of the Act. It is settled principle of law that when quantum appeal is admitted by the Hon'ble High Court by framing a question of law, as in the instant case, penalty u/s 271(1)(c) of the Act is not leviable as has been held by Hon'ble Delhi High Court in cases of PCIT vs. Harsh International (P) Ltd.[2020 (12) TMI 1082 - DELHI HIGH COURT] and CIT vs. Nayan Builders & Developers [2014 (7) TMI 1150 - BOMBAY HIGH COURT] The assessee is that when substantial question of law has been framed by the Hon'ble High Court in an appeal preferred by the assessee challenging quantum order, the issue has become debatable, the impugned penalty could not survive. We are of the view that Assessing Officer has failed to bring on record if assessee has furnished inaccurate particulars income at any stage of assessment proceedings, hence, the question framed in preceding para is decided in favour of the assessee. So finding no illegality or perversity in the impugned order passed by the Commissioner of Income-tax(Appeals) deleting the penalty levied by Assessing Officer under Section 271(1)(c) of the Act, the present appeal filed by the Revenue is hereby dismissed. Issues:Penalty under Section 271(1)(c) of the Income-tax Act, 1961 for inaccurate particulars of income.Analysis:Issue 1:The appellant sought to set aside the penalty levied under Section 271(1)(c) of the Act.Analysis:The appellant, Additional CIT, Special Range-4, New Delhi, filed an appeal challenging the penalty of Rs. 18,74,19,661 imposed by the Assessing Officer. The penalty was confirmed by the Commissioner of Income(Appeals)-42, New Delhi. The controversy arose from the disallowance of deductions claimed by the assessee for non-compete fee and signages and ice boxes, leading to penalty proceedings under Section 271(1)(c) of the Act.Issue 2:Determining whether the assessee furnished inaccurate particulars of income to attract penal provisions under Section 271(1)(c) of the Act.Analysis:The central question was whether the assessee provided inaccurate particulars of income during the assessment proceedings. The Revenue contended that the assessee's claim amounted to furnishing inaccurate particulars, while the assessee argued that it made a bona fide claim based on audited financials. The Tribunal referenced various judicial precedents to support the assessee's position, emphasizing that an incorrect claim in law does not necessarily constitute inaccurate particulars.Issue 3:Impact of the quantum appeal being admitted by the Hon'ble High Court on the penalty under Section 271(1)(c) of the Act.Analysis:The Tribunal highlighted that when a substantial question of law is framed in a quantum appeal challenging the assessment order, the penalty under Section 271(1)(c) is not leviable. Citing relevant judgments, the Tribunal concluded that in cases where the issue is debatable, such as the treatment of non-compete fee as revenue or capital expenditure, the penalty is not applicable.Conclusion:The Tribunal dismissed the Revenue's appeal, ruling in favor of the assessee. It was established that the assessee did not furnish inaccurate particulars of income, and the penalty under Section 271(1)(c) was not warranted. The Tribunal also emphasized the significance of debatable issues and the impact of substantial questions of law framed by the High Court on penalty proceedings.