2024 (7) TMI 719 - AT - Income Tax

Penalty under Section 271(1)(c) deleted as incorrect legal claims don't constitute concealment or inaccurate particulars

Mahesh Vrajlal Babaria Versus Income Tax Officer, Circle-23 (1), Mumbai

Mahesh Vrajlal Babaria Versus Income Tax Officer, Circle-23 (1), Mumbai - TMI Issues:1. Appeal against order of Learned Commissioner of Income Tax (Appeals)2. Challenge of penalty imposition under section 271(1)(c) of the Income Tax Act, 19613. Proper opportunity of being heard during appellate proceedings4. Justification for penalty imposition based on inaccurate particulars of income5. Disallowance under section 14A r.w.r. 8D and its impact on penalty impositionIssue 1: Appeal against order of Learned Commissioner of Income Tax (Appeals)The appellant/assessee filed an appeal against the order of the Learned Commissioner of Income Tax (Appeals) for the A.Y. 2009-10. The grounds of appeal included challenges regarding the proper opportunity of being heard during the appellate order and the confirmation of penalty imposition under section 271(1)(c) of the Income Tax Act, 1961. The appellant contended that the order of the Learned Commissioner of Income Tax (Appeals) was framed in breach of statutory provisions.Issue 2: Challenge of penalty imposition under section 271(1)(c) of the Income Tax Act, 1961The penalty imposition under section 271(1)(c) was challenged by the appellant on various grounds. The appellant argued that the penalty was levied based on inaccurate particulars of income and that the conditions for initiating penalty proceedings were not fulfilled. The appellant also contended that the penalty could not be justified as the disallowance made under section 14A r.w.r. 8D was on an estimation basis only.Issue 3: Proper opportunity of being heard during appellate proceedingsThe appellant raised concerns regarding the lack of proper, effective, and fair opportunity of being heard during the appellate proceedings. It was argued that the appellant was not granted sufficient opportunity to present their case before the appellate authority, leading to a violation of the principles of natural justice.Issue 4: Justification for penalty imposition based on inaccurate particulars of incomeThe penalty proceedings under section 271(1)(c) were initiated for concealment of income/furnishing inaccurate particulars of income. The appellant clarified that the penalty was not warranted as the additions were made on an estimated basis. The appellant maintained separate accounts for shares accounting and had provided necessary documents during the proceedings.Issue 5: Disallowance under section 14A r.w.r. 8D and its impact on penalty impositionThe disallowance under section 14A r.w.r. 8D was a key factor in the penalty imposition. The appellant's submissions regarding the disallowance and the nature of expenses incurred in relation to earning exempt income were considered during the penalty proceedings. The authorities concluded that the appellant had furnished inaccurate particulars of income, leading to the penalty imposition.In the final judgment, the Tribunal analyzed the case in light of relevant legal precedents and observed that the appellant had not concealed income or furnished incorrect particulars of income. The Tribunal held that the penalty imposed under section 271(1)(c) was not sustainable and deleted the penalty. The appeal was allowed in favor of the assessee, emphasizing the importance of strict adherence to the provisions of the Income Tax Act, 1961 and the principles of natural justice.