2010 (4) TMI 1150 - AT - Income Tax

Summary

Issues involved: Appeal against penalty u/s.271(1)(c) for assessment years 2001-2002 and 2002-2003.

Assessment Year 2001-2002:
The assessee declared income of Rs. 1.15 crore, but assessment u/s.143(3) determined total income at Rs. 1.96 crore. The Assessing Officer taxed rental income under "Income from house property" instead of "business income," disallowing expenses and depreciation claimed by the assessee. Penalty u/s.271(1)(c) of Rs. 33,66,864 was imposed. The ITAT noted that the claim made by the assessee was not found to be incorrect or false, following the decision in CIT Vs. Reliance Petro Products Pvt. Ltd. [(2010) 322 ITR 158 (SC)]. The ITAT overturned the penalty, emphasizing that making a claim not sustainable in law does not automatically attract penalty.

Assessment Year 2002-2003:
Similar to the previous year, the assessee faced penalty on rental income and disallowance of expenses and depreciation. The ITAT applied the rationale of the Reliance Petro Products Pvt. Ltd. case, directing the deletion of penalty for rental income and maintaining the decision on expenses and depreciation allowance. Consequently, the penalty for this year was also deleted.

In conclusion, both appeals were allowed, and the penalty u/s.271(1)(c) for the assessment years 2001-2002 and 2002-2003 was overturned based on the principles established in the Reliance Petro Products Pvt. Ltd. case.