2014 (12) TMI 1160 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has concealed its income by not showing the same u/s 45(1A) in spite of its known facts - CIT(A) deleted the penalty - Held that - In the present case we find there was no furnishing of inaccurate particulars and concealment of income. The assessee has suffered loss on fire. It was duly disclosed in the Profit and loss account and in the audit report. AO did not allow loss as business loss by referring to provision of section 45(1A) of the Act. On appeal the ld. CIT(A) allowed the loss as business loss. In further appeal ITAT held that the same was not allowable as business loss. From the above we note that the issue was debatable and it cannot be said that the assessee had any malafide intention. It is a settled law that penalty cannot be imposed unless the conduct of the assessee is contumacious. It is also not the case that assessee s case was a bogus claim which was prima facie liable to be disallowed. The assessee was under bona fide belief that the loss on fire will be allowed as business loss. If the AO does not agree with the assessee and hold that loss cannot be allowed as business loss it cannot lead to a conclusion that the assessee has furnished inaccurate particulars of income or has concealed any income. See CIT vs Reliance Petro products (P) Ltd (2010 (3) TMI 80 - SUPREME COURT) and Hindustan Steel Ltd vs State of Orissa(1969 (8) TMI 31 - SUPREME Court) - Decided in favour of assessee.

Summary

Issues:
- Appeal against order of CIT(A) levying penalty u/s 271(1)(c) without considering facts.
- Delay in filing appeal by Revenue.
- Disallowance of loss on fire as business loss u/s 45(1A) in assessment.

Issue 1: Appeal against penalty u/s 271(1)(c) by CIT(A)

The Revenue filed an appeal against the order of CIT(A) levying a penalty u/s 271(1)(c) without considering the facts. The delay in filing the appeal was condoned by the Tribunal due to a reasonable cause attributed to long pendency of work. The issue raised was that the CIT(A) erred in levying the penalty without considering that the assessee did not conceal its income but had a debatable claim regarding the treatment of loss on fire as a business loss under section 45(1A) of the Income Tax Act. The CIT(A) deleted the penalty, stating that the assessee disclosed the loss, and the issue was debatable, not warranting a penalty as there was no concealment or inaccurate particulars of income.

Issue 2: Delay in filing appeal by Revenue

The appeal by the Revenue was noted to be time-barred by 78 days, with the reasonable cause for delay being the long pendency of work. The assessee's counsel did not object to the condonation of the delay, leading the Tribunal to condone the delay and proceed with the appeal.

Issue 3: Disallowance of loss on fire as business loss u/s 45(1A) in assessment

In the assessment, the AO disallowed the loss on fire claimed by the appellant as a business loss under section 45(1A) of the Income Tax Act. The CIT(A) allowed the claim, but the ITAT held that the loss was not allowable as a business loss. The Revenue initiated penalty proceedings, alleging that the assessee concealed income by claiming the loss. However, the CIT(A) deleted the penalty, emphasizing that the issue was debatable, and the assessee did not conceal income or furnish inaccurate particulars. The Tribunal upheld the CIT(A)'s decision, citing legal precedents that penalty cannot be imposed in the absence of contumacious conduct or deliberate defiance of law.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the CIT(A) to delete the penalty imposed under section 271(1)(c). The judgment highlighted the importance of considering factual aspects and legal provisions before imposing penalties, emphasizing that penalties should not be automatic but based on a finding of concealment or inaccurate particulars of income.