2016 (1) TMI 1231 - AT - Income Tax

Penalty under section 271(1)(c) - assessee has claimed depreciation/deduction in question and the same became unsustainable in law - Held that - The case of the appellant/assessee is squarely covered by the law laid down by the Hon ble Supreme Court in Reliance Petroproducts Pvt. Ltd 2010 (3) TMI 80 - SUPREME COURT as held that merely because the assessee claimed deduction which was not sustainable in law, penalty under section 271(1)(c) is not attracted and if the contention of the revenue is accepted, the assessee would be liable for penalty under section 271(1)(c) in every case where the claim made by the assessee is not accepted by the AO for any reason. We, therefore decide the issue in question in favour of the appellant/assessee

Summary

Issues:
- Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.
- Claim of depreciation on a motor car against interest income received from firms.
- Disallowance of profession tax deduction.
- Challenge of penalty order by the assessee.

Analysis:
1. The appeal was filed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, for providing inaccurate particulars of income. The assessee, a partner in two construction firms, had claimed depreciation on a motor car against interest income. The Assessing Officer (AO) disallowed the depreciation as the car was put to personal use, and the assessee was not actively engaged in business. Additionally, a profession tax deduction was disallowed due to lack of documentary proof. The AO initiated penalty proceedings, leading to a penalty of Rs. 1,38,571 being imposed.

2. The assessee challenged the penalty order before the Commissioner of Income Tax Appeals (CIT(A)), who upheld the penalty. The assessee then appealed to the Appellate Tribunal, arguing that the CIT(A) erred in confirming the penalty. The Tribunal considered the arguments presented by both parties, where the appellant relied on the Supreme Court's decision in CIT vs. Reliance Petro products Pvt. Ltd., while the revenue cited the case of Union of India vs. Dharmendra textile Processors.

3. The Tribunal examined the provisions of section 271(1)(c) of the Act, which penalizes concealment or furnishing inaccurate particulars of income. Citing the case of CIT vs. Reliance Petroproducts P. Ltd., the Tribunal noted that making a claim not sustainable in law does not amount to furnishing inaccurate particulars under section 271(1)(c). The Tribunal further highlighted a similar ruling in favor of the assessee in CIT vs. Nalin P. Shah (HUF).

4. Considering the facts and legal precedents, the Tribunal concluded that the appellant's claim for depreciation and deduction was made in good faith, without intentional inaccuracies. Relying on the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., the Tribunal held that the penalty under section 271(1)(c) was not justified. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty imposed on the assessee.

5. The Tribunal allowed the appeal in favor of the assessee, emphasizing that the claims made were not intentional inaccuracies but based on a genuine belief of entitlement. The decision was pronounced on 12th January 2016, in line with the legal principles discussed and established by the Hon'ble Supreme Court.