2012 (10) TMI 844 - AT - Income Tax

Penalty u/s. 271(1)(c) - excess deduction u/s. 80HHC - CIT(A) deleted the levy - Held that - Disallowance has resulted on account of retrospective amendment in section 80HHC by way of Taxation Laws (second amendment) Act, 2005 with retrospective effect from 1.4.98. These provisions were not there in the relevant section at time when assessee filed return of income on 31st October, 2000. At this time the assessee made a bonafide deduction u/s. 80HHC, on the basis of certificate issued by the Chartered Accountant in the prescribed Form No. 10CCAC. Moreover, when assessee has disclosed all the material facts for computation of his income, it could not be said that the at time when assessee filed return, he had failed to disclose fully and truly all material facts necessary for assessment. As decided in C.I.T., Ahmedabad Versus Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT it was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) & if the contention of the Revenue is accepted then every Return where the claim made is not accepted by AO for any reason the assessee will invite penalty under Section 271(1)(c) - in favour of assessee.

Summary

Issues:
1. Justification of deleting penalty u/s. 271(1)(c) for furnishing inaccurate particulars of incomes.
2. Justification of holding that Assessing Officer was not justified in levying penalty u/s. 271(1)(c) for willfully claiming excess deduction u/s. 80HHC.

Issue 1:
The case involved the deletion of a penalty u/s. 271(1)(c) for furnishing inaccurate particulars of incomes. The Assessing Officer noted that the assessee had inflated business profit to claim deduction u/s. 80HHC. The Assessing Officer imposed a penalty due to the claimed excess deduction. The assessee argued that the deduction was based on amendments and changes in the law, and the department's circular clarified no penalty should be initiated. The Ld. Commissioner of Income Tax (A) considered the retrospective amendments in section 80HHC and held that the penalty was not justified as the assessee had disclosed all material facts for income computation. The Ld. Commissioner relied on relevant case law and concluded that the penalty was unwarranted.

Issue 2:
The second issue pertained to the Assessing Officer's decision to levy a penalty u/s. 271(1)(c) for willfully claiming excess deduction u/s. 80HHC. The Assessing Officer found the assessee had willfully furnished inaccurate income details, leading to the concealment of income. The Ld. Commissioner of Income Tax (A) analyzed the retrospective amendments in section 80HHC and concluded that the penalty was not justified. The Tribunal noted that the disallowance arose due to retrospective amendments, and the assessee had made a bonafide deduction based on the law at the time of filing the return. The Tribunal held that the rigors of section 271(1)(c) were not applicable as the assessee had disclosed all material facts, and the penalty was not warranted.

In summary, the case involved the deletion of a penalty u/s. 271(1)(c) for furnishing inaccurate particulars of incomes and for willfully claiming excess deduction u/s. 80HHC. The Tribunal upheld the Ld. Commissioner's decision, emphasizing that the penalty was not justified due to the retrospective amendments in the law and the assessee's full disclosure of material facts for income computation. The Tribunal referred to relevant case law and highlighted that the penalty provisions should be applied judiciously, considering all relevant circumstances. Ultimately, the appeal filed by the Revenue was dismissed, affirming the decision to delete the penalty.