2015 (10) TMI 2551 - AT - Income Tax

Levy of penalty under S.271(1)(c) - claim u/s 80IB made - Held that - A new line of business engaged in by the assessee, viz. manufacture and sale of electronic street light timers, has come to light, and it led to disclosure in the returns filed in response to notices under S.153A, higher income than what was declared earlier by the assessee. Assessing Officer in the present case is not attributing any concealment or furnishing of inaccurate particulars in respect of the entire income relating to this new line of business, but confining himself only to the claims made for deduction under S.80IB, while proposing penalty under S.271(1)(c). This approach of the Assessing Officer, in considered opinion is not justified. Having not proposed any penalty in relation to the larger portion of profit of the new line of business, there is no justification for penalty in relation only to the claim made by the assessee for deduction under S.80IB of the Act. Had the assessee not made the claim for deduction under S.80IB, if the approach of the Assessing Officer is approved, there is no case for penalty for concealment, because everything would have remained profit of the new line of business discovered, in relation to which no penalty proceedings were initiated. Considering in the light of the fact that disclosure of profits from such business did not attract any penalty u/s 271(1)(c), making a claim u/s 80IB out of those profits can only be considered as genuine claim. This is not a fit case for levy of penalty under S.271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) for claiming deduction under Section 80IB without proper documentation.

Detailed Analysis:
The case involved three appeals by the assessee against penalties imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2001-02 to 2003-04. The penalties were confirmed by the Commissioner of Income-tax (Appeals) and were related to the claim of deduction under Section 80IB without adequate documentation.

The facts of the case revealed that the assessee, engaged in the manufacture and sale of electronic street light timers, did not disclose this business income in the return of income. The Assessing Officer disallowed the claims for deduction under Section 80IB due to the lack of proper books of account and relevant certificates. The CIT(A) upheld the disallowance, leading to the imposition of penalties under Section 271(1)(c).

The Tribunal noted that the assessee, unable to provide necessary certificates to support the deduction claims under Section 80IB, withdrew the claims during re-assessment proceedings. The Tribunal emphasized that the withdrawal of claims does not automatically imply concealment of income or furnishing inaccurate particulars, especially when the assessee contested the denial of claims up to the Tribunal level.

Referring to the case law of Reliance Petro Products Ltd., the Tribunal highlighted that the mere disallowance of a claim does not establish concealment or furnishing of inaccurate particulars. In this case, the assessee's inability to provide evidence led to the withdrawal of the claims, which did not amount to furnishing inaccurate particulars.

The Tribunal further criticized the Assessing Officer's selective approach in penalizing only the deduction claims under Section 80IB while not attributing concealment to the entire income from the new business line. It was deemed unjustified to impose penalties solely on the deduction claims when no penalty was proposed for the overall income from the new business activity.

In conclusion, the Tribunal ruled that the case was not suitable for the levy of penalties under Section 271(1)(c) and canceled the penalties imposed by the Assessing Officer, allowing the appeals of the assessee.

This detailed analysis showcases the progression of events leading to the imposition of penalties, the withdrawal of deduction claims, and the Tribunal's decision to cancel the penalties based on legal principles and factual considerations.