2023 (11) TMI 547 - HC - Income Tax

High Court upholds deletion of Section 271(1)(c) penalty where disallowances based on difference of opinion not concealment

Pr. Commissioner of Income Tax-2 Versus Tata Industries Ltd.

The Bombay HC upheld ITAT's decision to delete penalty under Section 271(1)(c) imposed on the assessee. The court found that disallowances made by AO were ... Penalty u/s 271(1)(c) - assessee had committed default by filing inaccurate particulars of total income in respect of certain disallowances - ITAT deleted the penalty levy - HELD THAT:- Disallowance was made by the AO due to difference in the opinion of assessee and the AO. As it is not a case of concealment of income or furnishing of inaccurate particulars of income. ITAT on the facts has agreed with the CIT(A) that assessee had made claim in transparent and befitting manner. In view of these conclusions arrived on facts, the ITAT agreed with the view of the CIT(A) that assessee has not committed any default or filed any inaccurate particulars of income warranting imposition of penalty. Apex Court in Commissioner of Income Tax Vs. Reliance Petroproducts Pvt Ltd. [2010 (3) TMI 80 - SUPREME COURT] held that where assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as concealment of income on its part and where the AO has taken a particular view contrary to the view that assessee had, it would not attract any penalty under Section 271(1)(c) of the Act. The Apex Court held that if this contention of the Revenue is accepted then in case of every return where the claim made is not accepted by Assessing Officer for any reason, assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature. Decided in favour of assessee. Issues involved:The judgment involves the appeal under Section 260A of the Income Tax Act 1961 against an order passed by the Income Tax Appellate Tribunal (ITAT) dismissing the appeal filed by the revenue. The main issues revolve around the penalty proceedings under Section 271(1)(c) of the Act, focusing on the disallowances made by the Assessing Officer (AO) related to professional fees, legal fees, and provision for diminution in value of investments.Professional Fees Disallowance:The AO made disallowances related to professional fees paid to S. B. Billimoria & Co. and legal fees claimed in the case of Deejay System Consultants Pvt Ltd. The penalty was levied under Section 271(1)(c) of the Act. The Commissioner of Income Tax (Appeals) (CIT(A)) allowed the appeal, and the penalty was deleted. The Tribunal upheld the findings of the CIT(A), stating that the assessee made full disclosure, and the disallowances were not concealed facts but were not allowable under the head of capital gains.Legal Fees Disallowance:Regarding the disallowance of legal fees paid by the assessee to Deejay System Consultant Pvt Ltd., the AO levied a penalty under Section 271(1)(c) of the Act. The Tribunal found the explanation given by the assessee to be plausible, and the expenses were considered genuine and bonafide. The nature of the disallowance did not indicate concealment or inaccurate particulars of income.Diminution in Value of Investments Disallowance:The AO disallowed the claim of provision for diminution in value of investments written back by the assessee, leading to a penalty under Section 271(1)(c) of the Act. The CIT(A) and the ITAT agreed that the claim was made transparently and in a fitting manner. It was highlighted that the circumstances necessitated the claim to prevent loss of benefits for the assessee. The ITAT concurred that no default or inaccurate particulars of income were furnished by the assessee.Legal Precedent:The judgment referred to a paragraph from the Supreme Court's decision in Commissioner of Income Tax Vs. Reliance Petroproducts Pvt Ltd., emphasizing that the mere fact that a claim made by the assessee was not accepted by the Assessing Officer does not automatically attract a penalty under Section 271(1)(c) of the Act. The court stressed that the intention of the legislature was not to penalize every return where the claim made was not accepted by the assessing officer.Conclusion:Ultimately, the Tribunal dismissed the appeal, stating that no substantial questions of law arose. The judgment emphasized that where all details of expenditure and income were furnished by the assessee, and the Assessing Officer took a different view, it would not warrant a penalty under Section 271(1)(c) of the Act. The court reiterated that penalizing every return with a non-accepted claim was not the legislative intent.