2014 (7) TMI 1186 - AT - Income Tax

Penalty levied u/s.271(1)(c) - assessee has willfully claimed wrong deduction u/s.80IA - Held that - In Reliance Petro Products Ltd. (2010 (3) TMI 80 - SUPREME COURT ), the Hon ble Supreme Court emphasized that mere making of a claim of deduction which was not allowable by itself would not amount to furnishing inaccurate particulars of income. In fact, every legal disallowance under the provisions of the Act could not lead to the conclusion that there was furnishing of inaccurate particulars of income on the part of the assessee. We also find in the case of CIT v. Dharampal Premchand Ltd. 2010 (9) TMI 155 - DELHI HIGH COURT it was held that merely because the assessee had claimed deduction u/s.80IA and 80IB of the Act which claim was not acceptable to the Revenue, that by itself would not attract the penalty proceedings as the same could not be construed as furnishing inaccurate particulars of income u/s.271(1)(c) of the Act. In view of above factual and legal discussion, the penalty levied by the Assessing Officer was rightly deleted by the CIT(A) - Decided in favour of assessee.

Issues Involved:
1. Legality of the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)].
2. Deletion of penalty levied under section 271(1)(c) of the Income-tax Act, 1961.
3. Examination of facts and evidence by the CIT(A) concerning the penalty.
4. Interpretation of the term "derived" in the context of section 80IA.
5. Allegation of furnishing inaccurate particulars of income and concealment of income by the assessee.
6. Restoration of the Assessing Officer's order.

Detailed Analysis:

1. Legality of the Order Passed by the CIT(A):
The Revenue challenged the order of the CIT(A), claiming it was contrary to law and the facts and circumstances of the case. The CIT(A) had deleted the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, which the Revenue contested.

2. Deletion of Penalty Levied under Section 271(1)(c):
The CIT(A) had deleted the penalty levied under section 271(1)(c), which was imposed by the Assessing Officer (AO) on the grounds that the assessee had furnished inaccurate particulars of income and concealed income. The AO had recalculated the deduction under section 80IA by excluding the sales tax benefit, which the assessee had included as part of trading receipts. The AO deemed this inclusion as an attempt to evade tax.

3. Examination of Facts and Evidence by the CIT(A):
The Revenue argued that the CIT(A) erred by canceling the penalty without examining the facts and evidence available on record, which were brought out by the AO in support of the penalty. The CIT(A) had accepted the assessee's explanation that the sales tax benefit was a trading receipt and thus eligible for deduction under section 80IA.

4. Interpretation of the Term "Derived" in the Context of Section 80IA:
The Revenue contended that the CIT(A) failed to appreciate that the term "derived" as used in section 80IA is narrower than "from." They argued that the sales tax benefit subsidy and its sale to an outside party could not be considered as derived from the generation, distribution, or transmission of power from the windmill, thus making it ineligible for the deduction.

5. Allegation of Furnishing Inaccurate Particulars of Income and Concealment of Income:
The AO had initiated penalty proceedings under section 271(1)(c) on the basis that the assessee furnished inaccurate particulars of income and concealed income by wrongly claiming the deduction under section 80IA. The CIT(A) disagreed, stating that the assessee had disclosed all relevant facts and acted in a bona fide manner. The CIT(A) also noted that the issue involved a complex interpretation of law, which could lead to a genuine difference of opinion.

6. Restoration of the Assessing Officer's Order:
The Revenue sought to vacate the CIT(A)'s order and restore the AO's order, arguing that the penalty was justified. However, the Tribunal found that the CIT(A) had rightly deleted the penalty as the assessee had offered a bona fide explanation and disclosed all necessary facts. The Tribunal emphasized that merely making a legal claim, even if ultimately found to be incorrect, does not amount to furnishing inaccurate particulars of income or concealment of income.

Conclusion:
The Tribunal upheld the CIT(A)'s order, stating that the penalty under section 271(1)(c) was not warranted. The Tribunal found that the assessee had made a bona fide legal claim and disclosed all relevant facts. The appeal filed by the Revenue was dismissed, and the CIT(A)'s order deleting the penalty was upheld.

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