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2012 (4) TMI 352 - AT - Income TaxDeletion of penalty by CIT(A) imposed u/s 271(1)(c) by the AO ignoring that the assessee has not discharged its onus of proving that there was no intention of concealment on its part and the mistake was bonafide - A.O. noticed that the assessee claimed deduction for expenses on account of fines and penalties - assessee debited an amount of Rs. 1,90,338/- under the head bad debts written off - Held that - the assessee produces no fresh evidence or presents any additional or fresh circumstance in penalty proceedings, he would be deemed to have failed to discharge the onus placed on him and the levy of penalty could be justified - the explanations appended to section 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return - Even if there is no concealment of income or furnishing of inaccurate particulars, but on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision fair and appropriate to vacate the findings of the ld. CIT(A) and restore the matter to his file with the directions to readjudicate the levy of penalty - against assessee.
Issues Involved:
1. Legality of CIT(A)'s order. 2. Deletion of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. 3. Disallowance of expenses on account of fines and penalties. 4. Disallowance of bad debts written off. 5. Applicability of Explanation 1 to Section 271(1)(c) of the Income-tax Act, 1961. Detailed Analysis: 1. Legality of CIT(A)'s Order: The Revenue contended that the CIT(A)'s order was "wrong, perverse, illegal and against the provisions of law" and should be set aside. The CIT(A) had cancelled the penalty imposed by the AO without properly analyzing the facts and explanations provided by the assessee, particularly in light of Explanation 1 to Section 271(1)(c) of the Act. 2. Deletion of Penalty Imposed Under Section 271(1)(c): The CIT(A) had deleted the penalty imposed by the AO, who had levied a penalty of Rs. 6,50,254/- for furnishing inaccurate particulars of income. The AO argued that the assessee failed to discharge the onus of proving no intention of concealment as required under Explanation 1 to Section 271(1)(c) of the Act. The CIT(A) did not record any findings on whether the assessee discharged this onus. 3. Disallowance of Expenses on Account of Fines and Penalties: The AO disallowed Rs. 15,86,681/- claimed by the assessee as expenses for fines and penalties, citing that such deductions are not permissible under the explanation below Section 37(1) of the Act. The CIT(A) referred to ITAT decisions in the cases of Chetak Carriers and New Amar Goods Carrier, which allowed similar expenses as business expenditures. However, the CIT(A) did not analyze the specific facts of the assessee's case or consider the explanation appended below Section 37(1) introduced by the Finance Act, 1998. 4. Disallowance of Bad Debts Written Off: The AO disallowed Rs. 1,90,338/- claimed as bad debts, including Rs. 90,505/- pertaining to a bank guarantee forfeited by the Railways. The AO argued that the assessee did not satisfy the conditions laid down in Section 36(1)(vii) read with Section 36(2) of the Act. The CIT(A) held that no facts were concealed or wrongly presented by the assessee and that disallowance of a claim does not automatically lead to a penalty. 5. Applicability of Explanation 1 to Section 271(1)(c): The AO imposed the penalty on the grounds that the assessee failed to discharge the onus under Explanation 1 to Section 271(1)(c). The CIT(A) did not address whether the assessee discharged this onus or analyze the explanation provided by the assessee. The Tribunal noted that the CIT(A) should have considered whether the explanation offered by the assessee was bona fide and whether all material facts were furnished. Tribunal's Decision: The Tribunal vacated the findings of the CIT(A) and restored the matter to the CIT(A)'s file for re-adjudication. The CIT(A) was directed to reconsider the levy of penalty in light of the Tribunal's observations and various judicial pronouncements. The CIT(A) was also instructed to pass a speaking order, clearly stating whether the assessee discharged the onus under Explanation 1 to Section 271(1)(c). The appeal was allowed for statistical purposes.
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