2009 (2) TMI 508 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT(A) erred in directing the Assessing Officer to delete the penalty levied u/s 271(1)(c).
2. Whether the assessee concealed income or furnished inaccurate particulars of income.

Summary:

Issue 1: Deletion of Penalty u/s 271(1)(c)
The revenue challenged the CIT(A)'s decision to delete the penalty levied u/s 271(1)(c). The CIT(A) had directed the Assessing Officer to delete the penalty on the grounds that the issue was highly debatable and that there was no concealment of income or furnishing of inaccurate particulars. The revenue argued that the penalty was justified as the expenses incurred by the assessee-company were covered by the provisions of section 35D of the Income-tax Act.

Issue 2: Concealment of Income or Furnishing Inaccurate Particulars
The Assessing Officer levied penalty u/s 271(1)(c) on two counts: expenditure on project feasibility report and expenditure on market survey and research. The CIT(A) cancelled the penalty, observing that the issue was highly debatable and the assessee had furnished all relevant particulars of its income. The Tribunal examined whether the penalty u/s 271(1)(c) read with Explanation 1 was applicable. It was noted that the expressions "has concealed the particulars of his income" and "has furnished inaccurate particulars of income" are not defined in the Act but imply a duty to make a correct and complete disclosure of income.

The Tribunal emphasized that the penalty provisions operate when there is concealment of particulars of income or failure to disclose fully and truly all material facts. The Tribunal found that the assessee had disclosed full particulars for computation of total income, supported by technical reports, and had the right to claim deductions and reliefs. The Assessing Officer's duty was to compute the correct income in accordance with law, and merely disallowing certain claims did not constitute furnishing inaccurate particulars or concealment of income.

Conclusion:
The Tribunal confirmed the CIT(A)'s order, holding that the assessee had furnished all particulars of income and that the issue was highly debatable. Therefore, the penalty u/s 271(1)(c) was not justified. The appeal of the revenue was dismissed.