2011 (3) TMI 1746 - AT - Income Tax

Summary

Issues involved: Dispute over levy of penalty u/s 271(1)(c) for assessment year 2005-06.

Facts of the case: The assessee, a Special Purpose Vehicle under BIFR scheme, claimed expenses totaling Rs. 33,23,196, including interest on loans. AO disallowed most expenses, resulting in an addition of Rs. 33,11,617. Penalty proceedings u/s 271(1)(c) were initiated and penalty of Rs. 24,23,604 was levied.

Arguments before CIT(A): Assessee contended that no inaccurate particulars were furnished, and expenses were claimed in good faith. CIT(A) upheld penalty citing non-compliance with project completion method. Penalty was reduced to 100% of tax sought to be evaded.

Tribunal's analysis: Assessee followed project completion method but claimed expenses annually. Disallowance was accepted, but penalty was disputed. Tribunal noted the debatable nature of interest allowance timing. Considering conflicting tribunal decisions and lack of willful concealment, penalty was deemed inappropriate.

Conclusion: Tribunal allowed the appeal, setting aside the penalty imposed u/s 271(1)(c) for the assessment year 2005-06.