2012 (7) TMI 540 - AT - Income Tax

Penalty u/s 271(1)(c) of the Income tax Act - assessee company, it accepted its mistake and filed a revised computation of income Held that - Imposition of penalty on withdrawal of claim by way of revised computation assumes a character of technical default. In respect of bad debt also assessee filed all the primary particulars in this behalf and was under bona fide belief that the amounts having become irrevocable same were allowable as bad debts on write off - penalty should not be imposed only because it is lawful to do so and that the penalty should not be imposed for technical and venial defaults - assessee having furnished all primary facts along with the return of income and the mistake being technical or venial in nature, assessee is not liable to be visited with penalty u/s 271(1)(c) - penalty deleted - revenue s appeal is dismissed.

Summary

Issues:
Appeal against deletion of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2007-08.

Detailed Analysis:

1. Issue 1: Deletion of Penalty
The revenue appealed against the deletion of penalty by CIT(A) u/s 271(1)(c) of the Income Tax Act, 1961. The grounds raised included the contention that the additions made in the assessment were not due to difference of opinion or routine disallowance. The appellant argued that the claim of short term capital loss was not bona fide, and the assessee withdrew the claim after realizing the mistake. Additionally, it was argued that the bad debts written off were not eligible for claim. The appellant sought to reserve the right to amend the grounds of appeal.

2. Issue 2: Assessee's Arguments
The assessee contended that there was no intention to evade tax as the impugned short term capital loss was not claimed in the subsequent years. The revised computation was filed immediately after detection of the mistake, indicating no malafide intent. Regarding bad debts, the assessee believed they were not recoverable, and the claim was made in good faith. The assessee cited various case laws to support their contentions.

3. Issue 3: CIT(A) Decision
The CIT(A) held that all relevant particulars were disclosed by the assessee, and the claim withdrawal was done before assessment. It was noted that if the issue was debatable, penalty under section 271(1)(c) could not be imposed. The CIT(A) relied on judgments to support the decision to delete the penalty.

4. Issue 4: Tribunal's Decision
The Tribunal considered that the assessee had disclosed all primary facts and the mistake was technical in nature. The withdrawal of the claim did not result in any tax advantage. The Tribunal cited the Reliance Petro Products case and held that the penalty should not be imposed for technical or venial defaults. The Tribunal upheld the CIT(A)'s decision to delete the penalty.

5. Conclusion
The Tribunal dismissed the revenue's appeal and upheld the decision to delete the penalty u/s 271(1)(c) for A.Y. 2007-08. The judgment emphasized the importance of disclosing primary facts and the technical nature of the mistake in withdrawing the claim. The decision was based on the principle that penalties should not be imposed for minor or technical errors when all relevant details were disclosed.