2015 (5) TMI 1146 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowances under section 40(a)(ia) - Held that - The assessee has disclosed the entire facts before the authorities below without concealing any income. The assessee made a claim of deduction in the return of income and explained the facts but the same were not accepted by the authorities below and additions have been confirmed. Therefore it is a case of mere disallowance of expenditure without bringing any adequate material against assessee to prove that assessee has concealed the particulars of income or has furnished inaccurate particulars of income. The assessee made a bonafide claim of deduction of the expenditure even though it was not acceptable to the revenue would not lead to inference that assessee has concealed the particulars of income or filed inaccurate particulars of income. Nothing is brought on record if claim of assessee was incorrect in law or was malafide. - Decided in favour of assessee

Summary

Issues:
Challenge to cancellation of penalty under section 271(1)(c) of the Income Tax Act for assessment year 2006-07.

Analysis:
1. The Assessing Officer initiated penalty proceedings based on various additions made and upheld by the ITAT Chandigarh. The penalty was imposed under section 271(1)(c) of the Act for furnishing inaccurate particulars of income by claiming wrong deductions willfully.
2. The appellant challenged the penalty order before the CIT(A), arguing that the penalty should only apply to disallowances under section 40(a)(ia), not the entire addition confirmed by the Tribunal. Citing relevant legal precedents, the appellant contended that the penalty was not justified.
3. The CIT(A) considered the submissions and canceled the penalty, emphasizing that the appellant did not deliberately furnish inaccurate particulars of income. Referring to the decision of the ITAT Delhi, it was concluded that disallowances under section 40(a)(ia) did not warrant penalty under section 271(1)(c).
4. The CIT(A) noted that the penalty was intended only for disallowances under section 40(a)(ia) but was erroneously computed on the entire addition. Therefore, the penalty on additions other than those under section 40(a)(ia) was also canceled.
5. The Revenue, represented by the DR, argued that the case involved concealment of income or furnishing inaccurate particulars, citing a Delhi High Court decision. The appellant's counsel reiterated that the penalty cancellation was appropriate, supported by the decision of the Delhi Bench.
6. The ITAT considered the issue of canceling the penalty on disallowances under section 40(a)(ia). It was observed that the appellant disclosed all facts without concealing any income, and the claim of deduction was legitimate and bonafide. The ITAT upheld the CIT(A)'s decision to cancel the penalty, emphasizing that the appellant did not conceal or furnish inaccurate particulars of income.
7. The ITAT dismissed the departmental appeal, affirming the CIT(A)'s decision to cancel the penalty based on the facts and legal precedents presented. The order was pronounced on 19th May 2015.