2011 (7) TMI 1272 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty levied by the AO.
2. Justification of the CIT(A)'s order.
3. Restoration of the AO's order.

Summary:

Issue 1: Deletion of Penalty Levied by the AO
The Revenue appealed against the CIT(A)'s order deleting the penalty of Rs. 6,47,011/- levied by the AO u/s 271(1)(c) of the Income-tax Act, 1961. The AO had disallowed the assessee's claims for deductions u/s 80HHC and 80IB on interest income, miscellaneous income, and service income, initiating penalty proceedings. The CIT(A) cancelled the penalty, noting that the ITAT had set aside the issues regarding eligibility of certain incomes for deductions, thus invalidating the basis for the penalty.

Issue 2: Justification of the CIT(A)'s Order
The CIT(A) found that the AO did not prove the assessee's claims were fraudulent or that the assessee failed to disclose relevant facts. The CIT(A) referenced judicial precedents, including the Hon'ble Kerala High Court in CIT Vs. A. Sreenivasa Pai and the Hon'ble Rajasthan High Court in Shivlal Tak Vs. CIT, emphasizing that mere failure to substantiate a claim does not warrant penalty if the explanation is bona fide and all facts are disclosed.

Issue 3: Restoration of the AO's Order
The Tribunal upheld the CIT(A)'s decision, noting that the penalty could not stand as the assessment basis was set aside by the ITAT. The Tribunal cited the Hon'ble Supreme Court in K.C. Builders Vs. ACIT and other cases, affirming that penalty does not survive after deletion of additions forming its basis. The Tribunal also agreed with the CIT(A) that the assessee's claims were bona fide, supported by CA certificates, and not indicative of concealment or furnishing inaccurate particulars.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s cancellation of the penalty and rejecting the grounds for restoring the AO's order. The Tribunal emphasized that erroneous claims without concealment or inaccurate particulars do not justify penalty imposition. The order was pronounced on 29-07-2011.