2015 (6) TMI 1115 - AT - Income Tax

Penalty imposed u/s.271(1)(c) - addition made on account of raw material purchased from Sun Pharmaceuticals, notional selling and distribution expenses and interest income on bank deposits/staff loan as not eligible for deduction u/s.80IB - Held that - Tribunal in assessment year 2005-06 in quantum proceedings, wherein the addition made on account of notional selling and distribution expenses was deleted by the Tribunal. Since the addition on account of notional selling and distribution has been deleted in quantum proceedings, the penalty order passed with respect to such addition has no legs to stand. With respect to the addition made on account of raw material purchases, interest income on bank deposit/staff loan, the Tribunal has deleted the penalty after observing that penalty is not leviable in respect of disallowance u/s.80IB of the Act on account of raw material purchases as it is merely a claim which is found to be not sustainable in law. Similarly the penalty with respect to the interest income on bank deposits/staff loan was deleted by the Tribunal by observing that penalty is not leviable in respect of disallowance u/s.80IB on account of interest income on bank deposit/staff loan as the assessee has furnished all details and it is merely a claim which is found to be not sustainable in law. Respectfully following the decision of the Tribunal in assessee s own case for the assessment year 2005-06, we do not find any infirmity in the order of CIT(A) for deleting the penalty imposed u/s.271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Appeals filed by revenue against CIT(A) order for penalty under section 271(1)(c) for assessment years 2004-05 & 2006-07 to 2008-09.

Analysis:
The appeals were consolidated and heard together. The penalty was imposed under section 271(1)(c) of the Act for various additions, including raw material purchases, notional selling and distribution expenses, and interest income on bank deposits/staff loan not eligible for deduction under section 80IB of the Act. The CIT(A) deleted the penalty for notional selling and distribution expenses based on Tribunal's decision in quantum proceedings. The penalty on raw material purchases was also deleted by CIT(A) following Tribunal's order in the assessee's own case for the assessment year 2005-06. Similarly, for the years 2006-07 to 2008-09, the CIT(A) deleted the penalty related to interest income on bank deposits/staff loan based on the Tribunal's decision in the assessee's case for 2005-06.

The Tribunal considered the contentions and reviewed the orders of the lower authorities and the Tribunal's decision in the assessment year 2005-06. The Tribunal noted that penalties were not sustainable for additions like notional selling and distribution expenses and interest income on bank deposits/staff loan disallowed under section 80IB. The Tribunal found no infirmity in the CIT(A)'s order deleting the penalties under section 271(1)(c) of the Act. Consequently, all appeals by the Revenue were dismissed, upholding the CIT(A)'s decision to delete the penalties.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalties imposed under section 271(1)(c) for various disallowed items, following the Tribunal's earlier decisions in the assessee's own case for the assessment year 2005-06. The Tribunal found the penalties not sustainable in law for the disallowances made, leading to the dismissal of all Revenue's appeals.