2012 (12) TMI 602 - AT - Income Tax

Penalty u/s 271(1)(c) AO made addition of expense incurred to earn exempt income u/s 14A Impose penalty u/s 271(1)(c) on said addition Held that - Following the decision in case of Sunash Investment Co.(2006 (12) TMI 266 - ITAT MUMBAI) that no penalty u/s 271(1)(c) can be levied on account of disallowance of pro-rata interest expenditure by invoking the provisions of sec.14A. No contrary view has been brought on record by the learned Departmental Representative. Therefore delete the penalty. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Income voluntarily offered to tax AO included the said amount in the total income and impose penalty u/s 271(1)(c) thereon Held that - As similar income was offered for taxation in earlier AY on which the AO chose not to impose penalty u/s 271(1)(c). AO could not place any material on record to show that the assessee came forward to offer the said income for taxation only due to his corner in this regard. There is nothing in assessment order to divulge that the assessee offered income pursuant to any detection by the Revenue. Rather it is suo moto offering by the assessee. Issue decides in favour of assessee Penalty u/s 271(1)(c) - Imposed on disallowance of depreciation on the Ozone grant During course of proceedings the assessee surrendered its claim of depreciation on capitalization of grant Held that - Mere fact that the assessee agreed not to claim depreciation on the amount of Ozone subsidy during the course of assessment proceedings cannot be a good ground for imposition of penalty. The initial view of the assessee that it was entitled to depreciation based on the judgment of the Hon ble Supreme Court) can be found fault with. Thus it cannot be said that the assessee made a mala fide claim in the shape of depreciation on the Ozone grant received from the State Government. Issue decides in favour of assessee

Summary

Issues Involved:
- Penalty proceedings under section 271(1)(c) for assessment years 2001-2002 to 2004-2005.

Assessment Year 2001-2002:
1. Curtailment of Deduction u/s 80-IB:
- Tribunal upheld deletion of penalty based on admitted question of law by High Court.
- Precedent from previous years supported deletion of penalty.
2. Disallowance u/s 14A:
- Tribunal supported deletion of penalty based on lack of contrary view and precedent.
3. Duty Drawback and Dividend Income:
- Assessee voluntarily offered income for taxation, penalty rightly deleted.
4. Depreciation on Ozone Grant:
- Assessee had a bona fide belief, penalty deleted as no mala fide intent was found.

Assessment Year 2002-2003:
1. Similar Issues as 2001-2002:
- Penalty deletion justified for curtailment of deduction u/s 80-IB, disallowance u/s 14A, and depreciation on Ozone grant.
2. Curtailment of Deduction u/s 80HHC:
- Tribunal's decision in favor of assessee upheld, penalty rightly deleted.

Assessment Year 2003-2004:
1. Curtailment of Deduction u/s 80-IB, 80HHC, and 80M:
- Penalty deletion upheld based on similarity to earlier years and Tribunal's decisions.

Assessment Year 2004-2005:
1. Curtailment of Deduction u/s 80-IB and 80HHC:
- Penalty deletion supported due to similarity with previous years' decisions.

Overall Outcome:
- Revenue's appeals dismissed, penalty deletions upheld for various issues across multiple assessment years.
- Cross objections not pressed and dismissed.

This judgment analyzed penalty proceedings under section 271(1)(c) for multiple assessment years. The Tribunal upheld penalty deletions based on legal precedents, admitted questions of law, lack of contrary views, and assessee's voluntary actions in offering income for taxation. The decision emphasized the importance of bona fide beliefs and legally sustainable views in determining penalties, ultimately leading to the dismissal of Revenue's appeals and cross objections.