2012 (11) TMI 396 - AT - Income Tax

Penalty u/s. 271(1)(c) - excess deduction u/s. 80HHC - Held that - As decided in CIT vs. S. Dhanabal 2008 (8) TMI 15 - HIGH COURT DELHI in respect of penalty imposed for disallowance u/s. 80HHE that explanation offered by appellant is bona fide since appellant claimed deduction on the basis of auditor as per statutory requirement and further appellant disclosed all material facts, hence penalty is not applicable. As decided in U.O.I. vs. Dharmendra Textiles Processors 2008 (9) TMI 52 - SUPREME COURT at penalty proceedings are separate than assessment proceedings and in the case of Income tax proceedings, these penalty proceedings are not automatic. Since issue involved for disallowance is debatable hence penalty cannot be imposed - in favour of assessee.

Summary

Issues:
Appeals filed by Revenue against the order of Commissioner of Income-tax(Appeals) for assessment years 1992-93 & 1996-97 regarding penalty levied u/s. 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The appeals were filed by the Revenue against the order of the Commissioner of Income-tax(Appeals) for the assessment years 1992-93 & 1996-97 concerning the penalty levied u/s. 271(1)(c) of the Income-tax Act, 1961. The penalty was imposed on the basis of disallowance made u/s. 80HHC for claiming excess deduction. The Commissioner of Income-tax(Appeals) deleted the penalty after considering the submissions of the assessee, who had disclosed all material particulars. The Revenue challenged this decision before the Appellate Tribunal ITAT, Ahmedabad.

During the hearing, the assessee did not appear, and the Tribunal proceeded with the appeal after hearing the Revenue's representative. The Tribunal observed that the Commissioner of Income-tax(Appeals) had considered all aspects of the matter and concluded that the assessee had disclosed all material particulars, a finding not contested by the Revenue. The Tribunal upheld the decision of the Commissioner of Income-tax(Appeals) and rejected the appeals of the Revenue.

The Tribunal cited various case laws, including decisions of the Hon'ble Supreme Court and High Courts, to support its decision. The Tribunal highlighted that penalty proceedings are separate from assessment proceedings and are not automatic in income tax proceedings. It referenced specific judgments where penalties were deleted for debatable views on disallowances under section 80HHC. The Tribunal emphasized that in cases where the issue is debatable, penalties cannot be imposed, as seen in relevant case laws.

In conclusion, the Appellate Tribunal ITAT, Ahmedabad confirmed the order of the Commissioner of Income-tax(Appeals) and dismissed both appeals filed by the Revenue. The Tribunal upheld the deletion of penalties imposed on the assessee for claiming excess deduction u/s. 80HHC, as the issue was found to be debatable, and the assessee had disclosed all material particulars, as per statutory requirements.