2012 (5) TMI 660 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of penalty u/s. 271(1)(c) of Income-tax Act, 1961 for assessment year 2004-05.

Summary:
The appeal was filed by the Revenue against the deletion of penalty imposed by the AO u/s. 271(1)(c) of the Income-tax Act, 1961, in relation to the assessment year 2004-05. The case revolved around the assessee writing off a sum of &8377; 19,48,743/- in its books of account towards Cafeteria expenses. The AO disallowed the deduction and imposed a penalty, which was later deleted by the ld. CIT(A) based on the assessee's submissions.

Upon hearing the rival submissions and examining the records, it was noted that the assessee had initially capitalized the expenses related to the Cafeteria project in earlier years but later claimed it as a business loss in the current year when the project was abandoned. The Tribunal observed that the issue was debatable with two possible views, as the assessee had disclosed complete particulars in its return of income. Citing the decision in the case of CIT vs. Reliance Petroproducts (P) Ltd., it was held that making a claim not sustainable in law does not automatically attract a penalty u/s. 271(1)(c).

Considering the facts and circumstances of the case, the Tribunal upheld the deletion of the penalty by the ld. CIT(A) as the issue was debatable and the assessee had made full disclosure. The appeal by the Revenue was dismissed accordingly.