2016 (6) TMI 1207 - AT - Income Tax

Penalty u/s. 271(1)(C) - assessee has claimed weighted deduction on purchase of Motor vehicles for employees - Held that - The claim of deduction was denied which by itself would not justify the levy of penalty u/s. 271(1)(c) of the Act. The facts in issues are identical to the facts considered by the Hon ble Supreme Court in the case of Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT wherein held a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - Decided in favour of assessee.

Summary

Issues: Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2005-06.

Analysis:
1. Background: The appeal was filed by the Revenue against the order of the Ld. CIT(A)-XIV, Ahmedabad, dated 21.03.2013, pertaining to A.Y. 2005-06. The primary grievance of the Revenue was the deletion of the penalty amounting to ?39,58,942/- imposed under section 271(1)(c) of the Income Tax Act.

2. Assessment Order: The penalty was based on the assessment order dated 26.12.2008, where the returned income of ?12,79,35,253/- was assessed at ?15,20,85,816/-. Various additions were made during the assessment, including expenditure capitalized, disallowance of garden expenses, disallowance of R & D Expenditure, and disallowance under section 14A of the Act.

3. Tribunal's Decision: The quantum additions were challenged before the Tribunal, which, in its order dated 31.05.2012, deleted some additions while upholding others. Notably, the Tribunal deleted the additions related to revenue expenditure treated as capital expenditure, garden expenditure, and disallowance under section 14A. However, an addition of ?82,99,000/- towards R & D expenses was upheld.

4. Penalty Imposition: With only the R & D expenses addition remaining for the penalty under section 271(1)(c) of the Act, the Tribunal's analysis was crucial. The Tribunal observed that the claim of weighted deduction on the purchase of motor vehicles for employees was denied. The Tribunal highlighted that capital expenditure on equipment for in-house research could be eligible for benefits, but expenditure on motor vehicles did not qualify for the same.

5. Legal Precedent: The Tribunal's decision was in line with the principles established by the Hon’ble Supreme Court in the case of Reliance Petro Products 322 ITR 158. The Tribunal found that the denial of the claim for deduction did not warrant the imposition of a penalty under section 271(1)(c) of the Act.

6. Conclusion: After considering the orders of the authorities and the Tribunal's decision in the quantum appeal, the Tribunal dismissed the Revenue's appeal against the deletion of the penalty. The Tribunal upheld the denial of the claim for deduction based on legal principles, thereby declining to interfere with the First Appellate Authority's decision.

This detailed analysis outlines the key aspects of the judgment, including the background, assessment details, Tribunal's decision on quantum additions, rationale for penalty imposition, adherence to legal precedent, and the ultimate dismissal of the Revenue's appeal.