2011 (10) TMI 649 - AT - Income Tax

Penalty u/s. 271(1)(c) - Addition u/s 80IA - Held that - Penalty u/s. 271(1)(c) is not sustainable. The penalty in respect of disallowance of deduction u/s.80IA we find that this ground is squarely covered in favour of the assessee by the judgment of Hon ble apex court in the case of CIT v. Reliance Petroproduct Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) wherein as held mere making a claim not allowable will not lead to imposition of penalty.

Summary

Issues:
Appeal against penalty u/s 271(1)(c) of the Income-tax Act, 1961 for the assessment year 1998-99.

The judgment involves an appeal by the Revenue against the order of the CIT(A)-XIV, Ahmedabad dated 28-12-2005, concerning the reduction of penalty u/s. 271(1)(c) from Rs. 1,15,41,646 to Rs. 49,72,446. The brief facts of the case include the Assessing Officer levying a penalty due to various additions to the income, such as purchase of HDPE fabrics, interest diversion, share and debenture issue expenses, interest income reduction, and disallowed deduction u/s 80IA. The CIT(A) partly allowed the appeal, upholding the penalty addition for the purchase of HDPE fabrics but canceling the penalty on other additions, leading to the Revenue appealing against the cancellation of penalty. The ITAT had previously decided on various issues, including deleting the addition made by the Assessing Officer regarding interest income set-off and sending back the issue of interest excess to the Assessing Officer. The issues of disallowance of certain amounts were also sent back to the Assessing Officer. The tribunal found that the penalty u/s. 271(1)(c) was not sustainable, especially in light of the judgment of the Hon'ble apex court in a specific case. Consequently, the penalty for disallowance of deduction u/s 80IA was deemed unsustainable. Therefore, the tribunal confirmed the order of the CIT(A) in canceling the penalty, leading to the dismissal of the Revenue's appeal.

In conclusion, the judgment dealt with the reduction of penalty u/s. 271(1)(c) for the assessment year 1998-99, with the tribunal ultimately dismissing the Revenue's appeal based on the findings related to various additions to the income and the sustainability of the penalties imposed.