2012 (10) TMI 1162 - AT - Income Tax

Summary

Issues Involved: Appeal against penalty order u/s. 271(1)(c) of the Income Tax Act for treating expenditure as capital instead of revenue.

Issue 1: Proper appreciation of facts and case laws

The appellant appealed against the penalty order passed by the Assessing Officer u/s. 271(1)(c) of the Income Tax Act, alleging that the Commissioner of Income-tax (A) erred in confirming the penalty order without proper appreciation of facts and the case laws submitted before him.

Issue 2: Difference in opinion leading to penalty

The appellant contended that the penalty order was confirmed despite the disallowance arising from a difference in opinion without any intention to conceal income, challenging the decision of the Commissioner of Income-tax (A).

Issue 3: Ignoring precedent set by ITAT

The appellant argued that the Commissioner of Income-tax (A) erred in ignoring the judgment of the Honorable ITAT for the assessment year 2000-01, where it was concluded that a portion of the repairs claimed as capital expenditure should be treated as revenue expenditure.

Issue 4: Request for amendment of grounds of appeal

The appellant requested the authority to add, delete, amend, alter, or modify any grounds of appeal as deemed necessary.

In the assessment, the Assessing Officer observed that the appellant had claimed an expenditure under the head 'Repairs' for restructuring and modernizing its factory premises, which was treated as capital expenditure. The disallowance made by the AO was upheld by the First Appellate Authority (FAA) and the ITAT.

Penalty proceedings u/s. 271(1)(c) were initiated based on the disallowance, and the penalty was imposed by the AO. The appellant challenged the penalty order before the FAA, who upheld it invoking explanation 1 of Section 270(1)(c).

During the proceedings, the Authorized Representative argued that the disallowed expenditure was treated as revenue by the appellant, and the disagreement with the AO did not amount to inaccurate particulars being filed. The Departmental Representative, however, supported the orders of the AO and FAA, alleging inaccurate particulars were filed.

The Tribunal found that the disallowed expenditure being treated as capital did not automatically imply inaccurate particulars were filed. The claim made by the appellant, supported by documentary evidence, did not warrant penalty under Section 271(1)(c) for concealing income. The Tribunal differentiated between a false claim and a genuine claim, emphasizing that penalty cannot be imposed solely based on a claim being rejected in assessment proceedings.

Referring to the case law of Reliance Petro Products P. Ltd, the Tribunal concluded that since details of expenditure were provided during assessment, the penalty imposed by the AO and confirmed by the FAA was unwarranted. Consequently, the appeal filed by the appellant was allowed, and the penalty was set aside.