TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 741
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....e CIT(A) is correct in accepting the assessee's contention that the due disclosure in the accounts were made despite the fact that provision for any expense claimed is not an allowable expense? 4. Whether in facts and circumstances of the case, the CIT(A) is correct in deleting the penalty imposed by the AO despite the fact that the assessee's disclosure is not in conformity with the provisions as laid down in clause (B) to explanation 1 to section 271(1)(c) ? 5. Whether in facts and circumstances of the case, the CIT(A) is correct in observing that the assessee has furnished bonafide explanation in disclosing all material facts despite the fact that it is a settled principle that provision for any expense is not a bonafide claim? 6. Whether in facts and circumstances of the case, the CIT(A) is correct in observing that the additions/allowances were made due to technical/deeming provision despite the fact that the assessee has made incorrect claim in the profit and loss account under the head provision for expenses? 7. Any other ground that may be urged at the time of hearing." FACTS OF THE CASE 2. Facts giving rise to the present appeal are that the assessment was fr....
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....ticulars thereof. It is a settled legal position that penalty proceedings and quantum proceedings are separate and distinct. It is equally a settled legal position that the explanation offered in the penalty proceedings has to be considered separately and independently in the matrix of requirements of the penal provisions. As per opinion expressed by the Hon'ble Supreme Court in CIT vs. Anwar Ali, 76 ITR 696 findings in assessment order may constitute good evidence but it does not follow that penalty for concealment u/s 271(1)(c) is mandatory whenever an addition or disallowance is made. 4.3 It will be relevant here to examine the provisions of Section 271(1)(c) which is reproduced below: "271. Failure to furnish returns, comply with notices, concealment of income, etc. - (1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person - (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, - (A) suc....
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....nd the position as it existed, when the return of income was filed. The Act, i.e. the Income Tax Act, is a complex legislation involving intricate and often debatable legal positions. The legal issue involved may relate to principles of accountancy Invariably, on questions of interpretation, the assesses do adopt a legal position which they perceived as most beneficial or suitable. This would not be construed as lack of bona fides as long as the legal position so adopted is not per se contrary to the language of the statute or an undebatable legal position not capable of a difference connotation and understanding. When two legal interpretations were plausible and there was a genuine or credible plea, penalty for concealment/furnishing of inaccurate particulars, should not and cannot be imposed. If the view taken by the assessee required consideration and was reasonably arguable, he should not be penalized for taking the position. The tax statutes are convoluted and complex and there can be manifold opinions on interpretation and understanding of a provision or the tax treatment. In such cases, even when the interpretation placed by the Revenue is accepted, penalty should not be imp....
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....for certain reasons, it is different matter that on account of difference of opinion, which is also possible amongst various authorities, the plea of the assessee has not been accepted Linder the deeming provisions, if the explanation is bonafide and material to the computation of total income, are disclosed by the assessee, Explanation 1 will not apply." 4.7 In my view, the appellant has furnished an explanation which it has substantiated as bonafide in so much as all the material facts were disclosed in the return and the appellant, cannot be held guilty of furnishing any inaccurate particulars of income. In the landmark case of Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 the Hon'ble Supreme Court had made the following observation: "A glance at the provisions of section 271(1)(c) of the Income Tax Act, suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be inco....