2014 (11) TMI 981 - AT - Income Tax

Penalty under section 271(1)(c) - claim of deduction under section 80-IB disallowed - CIT(A) deleted penalty levy - Held that - The assessee while making claim of deduction under section 80-IB in computation of income disclosed complete facts and claimed to have permanent registration as small scale unit issued by the District Industries Centre, Patiala. The claim of the assessee was qualified by the auditor as well. The assessee referred to various notifications issued by the concerned Department through which time to time, the monetary limits were varying and ultimately the last notification was also favourable to the assessee. In the case of the assessee, the value of exclusive plant and machinery as on April 1, 2004 was ₹ 2.93 crores and because of the addition made in the assessment year under appeal of ₹ 58.33 lakhs, the total investment comes to ₹ 3.51 crores. It is, therefore, clear that the assessee was small scale industrial unit and was entitled for deduction under section 80-IB earlier and it is only because of some additions made in year under consideration, the assessee would not have qualified for deduction under section 80-IB of the Act. The assessee, therefore, made a bona fide claim to deduction under section 80-IB as per the notification issued lastly which covered such unit upto ₹ 5 crores though there may be some restriction thereon. It is, therefore, not a case of filing of inaccurate particulars of income or concealing the particulars of income for imposition of penalty under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Challenge to cancellation of penalty under section 271(1)(c) of the Act for assessment year 2005-06.

Analysis:
The appeal by the Revenue contested the cancellation of penalty under section 271(1)(c) of the Act, following an assessment completed under section 147/143(3) of the Act. The dispute arose due to disallowance of deduction under section 80-IB as the assessee's investment in plant and machinery exceeded the prescribed limit for small scale industries. The assessee argued that all details were disclosed, and the claim was made in good faith despite changing notifications causing confusion. The Commissioner of Income-tax (Appeals) considered the explanations and various judgments, concluding that the penalty was not sustainable as all material facts were disclosed, and there was no concealment or inaccurate filing of particulars.

The Departmental representative argued that the assessee wrongly claimed deduction under section 80-IB, constituting concealment of income. However, the counsel for the assessee reiterated that all relevant details were disclosed, and the claim was made in good faith based on changing notifications. The counsel relied on legal precedents emphasizing that penalties should not be imposed for inadvertent errors made in good faith.

The Tribunal examined the arguments and upheld the Commissioner's decision to cancel the penalty. It was noted that the assessee had fully disclosed facts, including auditor qualifications, and made a bona fide claim based on the prevailing notifications. The Tribunal found no error in the Commissioner's decision, emphasizing that penalties should not be levied for debatable issues when complete particulars were disclosed. Consequently, the Department's appeal was dismissed, affirming the cancellation of the penalty under section 271(1)(c) of the Act.