2015 (3) TMI 1199 - AT - Income Tax

Penalty u/s 271(1)(c) - Additional Depreciation and of Exemption u/s 10B - Held that - The matter has been restored to the file of the AO to determine the same afresh in accordance with law as per the directions of the Tribunal and the matter is still pending before the AO. In these facts, we cancel the penalty levied u/s 271(1)(c) of the Act on these two items of disallowance Disallowance of Guarantee Commission of Directors, the Tribunal has already allowed the miscellaneous application preferred by the assessee and has allowed deduction of Guarantee Commission paid to the Directors and their remain no basis for levy of penalty u/s 271(1)(c) of the Act on this issue and the same is accordingly cancelled. Disallowance of Repair and Maintenance Expenses and disallowance out of Foreign Travelling Expenses - The issue that whether Repairs and Maintenance in respect of leased buildings was revenue or capital in nature or whether the part of the Foreign Travelling Expenses were for the business purposes of the assessee is clearly debatable in nature. This is a case where the assessee has disclosed all the material facts necessary for assessment at the time of filing of the return itself. The conduct of the assessee in this case was bonafide. In these facts of the case, we are of the view that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act on these two items of disallowances made by the AO and accordingly the penalty levied u/s 271(1)(c) of the Act on disallowance of Repair and Maintenance Expenses and out of Foreign Travelling Expenses is cancelled. - Decided in favour of assessee

Summary

Issues:
- Whether the Ld. CIT(A) erred in law and on facts in deleting the penalty u/s 271(1)(c) amounting to Rs. 1,07,50,171.

Analysis:
1. The appeal by the revenue for the assessment year 2006-07 was directed against the order of CITA challenging the deletion of penalty under section 271(1)(c) amounting to Rs. 1,07,50,171.
2. The Ld. DR argued that the penalty should be confirmed for disallowances on various expenses, relying on the AO's order and a decision of the Hon'ble Delhi High Court in a similar case.
3. The Ld. Counsel for the assessee opposed the penalty, highlighting that certain disallowances were restored to the AO for fresh determination, and some disallowances were based on information provided by the assessee itself.
4. The Tribunal canceled the penalty on disallowances of Additional Depreciation, Exemption u/s 10B, and Guarantee Commission based on various reasons, including the matter being pending before the AO and allowance of Guarantee Commission by the Tribunal.
5. The Tribunal found the disallowances of Repair and Maintenance Expenses and Foreign Travelling Expenses to be debatable, with the assessee's conduct being bonafide, leading to the cancellation of the penalty on these items.
6. Ultimately, the Tribunal dismissed the appeal by the revenue, stating that it was not a fit case for the levy of penalty under section 271(1)(c) on the disputed disallowances.

This detailed analysis of the judgment provides insights into the reasoning behind the Tribunal's decision to cancel the penalty on specific disallowances, emphasizing the legal arguments presented by both parties and the Tribunal's interpretation of the facts and applicable laws.