2011 (12) TMI 11 - AT - Income Tax

Penalty under 271(1)(c) - Held that - where assessee on the basis of past assessments has prima facie claimed deduction. It has disclosed all the basic facts truly and correctly. It has not concealed any particulars or furnished any inaccurate particulars levy of penalty cannot be justified.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for assessment year 2000-01.

Analysis:
1. Background: The case involves an appeal by the revenue against the deletion of a penalty of RS.1,39,42,002/- imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2000-01. The dispute arose from the inclusion of certain receipts in the computation of deduction under section 36(1)(viii) by an undertaking of the Government of India engaged in providing long-term finance.

2. AO's Reassessment: The Assessing Officer (AO) had reopened the assessment based on the opinion that certain receipts like dividend, interest from bank, and miscellaneous receipts did not qualify for the deduction under section 36(1)(viii) as they were not derived from the business of providing long-term finance. Consequently, the AO added back 40% of such receipts as income of the assessee.

3. Appeal to CIT(A) and Tribunal: The appeal to the Commissioner of Income Tax (Appeals) did not bring relief to the assessee. The Tribunal upheld the exclusion of such receipts from gross receipts for the deduction under section 36(1)(viii) but remitted the issue back to the AO for computing the disallowance after considering overhead expenses related to earning those receipts.

4. Penalty Imposition: The AO initiated penalty proceedings under section 271(1)(c) based on the contention that the assessee had included these receipts in the gross receipts for deduction knowingly. The assessee argued that it had always claimed a similar deduction in previous years and had disclosed all facts truly and correctly, believing that the receipts qualified for deduction under section 36(1)(viii).

5. Appeal and Arguments: Dissatisfied with the penalty imposition, the assessee appealed to the CIT(A) reiterating its contention and highlighting that the penalty was deleted in a previous year under similar circumstances. The assessee maintained that there was no deliberate attempt to evade tax and relied on judicial precedents to support its case.

6. Contentions: The Departmental Representative (DR) argued that the assessee, being a government undertaking, should have been aware that certain receipts were not eligible for deduction under section 36(1)(viii). The counsel for the assessee, however, emphasized that the assessee had consistently claimed the deduction in the past, and there was a genuine belief in the eligibility of the receipts for deduction.

7. Decision and Rationale: The Tribunal considered the provisions of section 271(1)(c) and the deeming provisions regarding concealment of income. It noted that the assessee had disclosed all facts truly and there was no evidence of furnishing inaccurate particulars. Given the history of allowance of deduction by different Assessing Officers in previous assessments and the deletion of penalty in a prior year, the Tribunal held that there was no deliberate attempt to evade taxes. Therefore, the penalty under section 271(1)(c) was not justified, and the CIT(A) had rightly deleted it.

In conclusion, the Tribunal dismissed the revenue's appeal against the deletion of the penalty under section 271(1)(c) for the assessment year 2000-01, emphasizing the absence of deliberate evasion and the consistent belief of the assessee in the eligibility of the receipts for deduction under section 36(1)(viii).