2011 (9) TMI 1039 - HC - Income Tax

Penalty under s. 271(l)(c) - Held that - The assessee had made full disclosure about the claim. The claim was also certified by the chartered accountant. Necessary declarations in the prescribed forms were made may be in the case of the assessee such claim on merits was not granted. However this does not mean that the assessee had concealed any income. Further we find that the issue ultimately at any rate is debatable since one High Court has already held in favour of the assessee. We also find that in the case of CIT us. Reliance Petroproducts (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT) the apex Court observed that when no information as given in return is found to be incorrect penalty could not be imposed. It was held that making incorrect claim does not amount to concealment of particulars.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Act - Interpretation of s. 271(1)(c) for reversing CIT(A) order and confirming penalty without independent reasons - Sustainability of penalty under s. 271(1)(c) based on facts and evidence.

Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Act:
The issue in this case involved the imposition of a penalty under section 271(1)(c) of the Act. The assessee had made certain claims which were subsequently declined. Two main claims were in question: one related to the consumption of coal from GMDC's quota, and the other concerned job work charges claimed under section 80HHC of the Act.

2. Proceedings and Appeals:
The Assessing Officer (AO) imposed the penalty, which was challenged before the CIT(A). The CIT(A) reversed the penalty order, leading the Revenue to appeal to the Tribunal. The Tribunal, in turn, overturned the CIT(A)'s decision, prompting the present appeal before the High Court.

3. Penalty on Coal Consumption Claim:
In a separate appeal, the High Court had previously deleted the penalty related to the coal consumption claim. The Court considered the financial condition of the assessee, discrepancies in records, and past judgments favoring similar cases. Consequently, the penalty on this claim was deemed unjustified and was removed.

4. Penalty on Job Work Charges Claim:
The counsel argued that the CIT(A) had valid reasons for deleting the penalty on job work charges. The claim was supported by disclosures and certified by a chartered accountant. Reference was made to a Kerala High Court ruling supporting such claims under section 80HHC. The Tribunal's decision to reverse the CIT(A)'s order was contested by the assessee.

5. High Court's Decision:
After hearing both parties and examining the records, the High Court found that the assessee had made full disclosures and the claim was supported by necessary documentation. The issue was deemed debatable, especially since another High Court had ruled in favor of similar claims. Citing a Supreme Court judgment, the High Court held that an incorrect claim does not necessarily constitute concealment of income.

6. Conclusion:
The High Court concluded that the Tribunal erred in interfering with the CIT(A)'s order. Consequently, the first question regarding the interpretation of section 271(1)(c) was answered in favor of the assessee. As a result, the appeal was allowed, the Tribunal's judgment was set aside, and the matter was disposed of in favor of the assessee.