2012 (11) TMI 502 - AT - Income Tax

Penalty u/s 271 (1) (c) - disallowance of amortization claim written off in relation to membership fee paid to stock exchanges - Held that - As decided in Ananthraman Veerasinghaiah & Co. v. CIT 1980 (4) TMI 2 - SUPREME COURT the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the additions. Entitlement to depreciation on the membership fee of stock exchange u/s 32 is allowed to assessee as upheld by the Hon ble Apex Court in M/s Techno Shares & Stocks Ltd. Versus The Commissioner of Income Tax IV 2010 (9) TMI 6 - SUPREME COURT OF INDIA as the AO has not been able to establish that the claim of the assessee for deduction of depreciation u/s 32 was not bona fide or that any specific particulars were concealed or furnished inaccurate. Thus a mere disallowance of a claim of deduction does not necessarily imply concealment or furnishing of inaccurate particulars because the issue regarding allowability of deduction of depreciation on membership fee of stock exchange u/s 32 was debatable issue. A mere rejection of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee as confirmed in CIT v. Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT . It can at best be a wrong claim not a false claim - in favour of assessee.

Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961.
2. Determining whether the assessee furnished inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Deletion of penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961:

The primary issue in this case revolves around the deletion of a penalty amounting to Rs. 6,02,514/- imposed under Section 271(1)(c) of the Income-tax Act, 1961. The penalty was originally imposed by the Assessing Officer (AO) for allegedly furnishing inaccurate particulars of income by the assessee. The AO disallowed an amount of Rs. 17,90,000/- related to the amortization claim written off on account of membership fee paid to stock exchanges. The AO invoked Explanation 1 to Section 271(1)(c) and relied on several judicial precedents to justify the penalty.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] cancelled the penalty, stating that for imposing a penalty under Section 271(1)(c), it must be proven that the assessee concealed particulars of income or furnished inaccurate particulars. The CIT(A) referred to the Supreme Court's decisions in UOI v. Dharamendra Textile Processors and CIT v. Reliance Petro Products Pvt. Ltd. to highlight that mens rea (intention) is not necessary for civil penalties, and the conditions stated in Section 271(1)(c) must exist for the penalty to be applicable.

The CIT(A) observed that the assessee had disclosed the cost of the membership card in their return of income and treated it as an amortized asset. Given the historical litigation on this issue and the Supreme Court's ruling in Techno Shares and Stock Ltd. v. ITO, the CIT(A) concluded that the disallowance did not amount to furnishing inaccurate particulars. Thus, the penalty was deemed unwarranted and was deleted.

2. Determining whether the assessee furnished inaccurate particulars of income:

The Tribunal examined whether the assessee had furnished inaccurate particulars of income. The AO had imposed the penalty on the grounds that the assessee's claim for amortization of the membership fee was disallowed. However, the Tribunal noted that the issue of treating the cost of the membership card as an amortized asset had been a subject of litigation and had been settled by the Supreme Court in Techno Shares and Stock Ltd. v. ITO, which allowed depreciation on the cost of the membership card under Section 32(1)(ii) of the Act.

The Tribunal emphasized that the assessee had disclosed all relevant details in the return of income and during the assessment proceedings. The claim for depreciation was made in a bona fide manner, and there was no evidence to suggest that the assessee had concealed any particulars or furnished inaccurate details. The Tribunal referred to the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars.

The Tribunal concluded that mere disallowance of a claim does not imply concealment or furnishing of inaccurate particulars. The assessee's claim was based on a debatable issue, and there was no indication that the explanation offered by the assessee was not bona fide. The Tribunal upheld the CIT(A)'s decision to cancel the penalty, stating that the erroneous claim, in the absence of concealment or furnishing of inaccurate particulars, does not warrant the imposition of a penalty.

Conclusion:

In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision to delete the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961. The Tribunal found that the assessee had made a bona fide claim for depreciation on the membership fee of the stock exchange, and there was no evidence of concealment or furnishing of inaccurate particulars. The mere disallowance of the claim did not justify the imposition of a penalty.

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