2013 (4) TMI 96 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowances of repair expenses - Held that - The Hon ble Delhi High Court in the case of Devsons (P). Ltd. v. CIT 2010 (11) TMI 84 - DELHI HIGH COURT has held that when a legal issue arises for consideration, which is debatable but the claim made by the assessee is not accepted, thereis no justification to invoke the penalty provisions under Section 271(1)(c). Assessee cannot be faulted and penalty should not be imposed because the assessee had taken a particular stand point, unless there are grounds or reasons to show that the assessee had not disclosed all the facts before the departmental authorities concerned. Also see Karan Raghav Exports P. Ltd. vs. CIT ( 2012 (3) TMI 335 - DELHI HIGH COURT), CIT vs. Zoom Communication P. Ltd. (2010 (5) TMI 34 - DELHI HIGH COURT) Thus in the absence of any other contrary material or distinguishing feature brought on record by the Revenue to show that the claim of deduction made by the assessee was not bonafide or bogus, respectfully following the ratio of the above decisions and the consistent view hold that there is no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) the penalty imposed by the A.O. and sustained by the CIT(A) is deleted. In favour of assessee.

Summary

Issues Involved:
1. Disallowance of repair expenses treated as capital expenditure.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Repair Expenses Treated as Capital Expenditure:
The assessee company, engaged in multiple businesses including printing, publishing, and broadcasting, filed a return declaring total income of Rs. 158,12,88,918.00, which was later revised to Rs. 158,01,27,570.00. The assessment was completed at an income of Rs. 1,659,031,250.00 after making certain additions and disallowances, including repair expenses of Rs. 58,92,803.00, which were treated as capital expenditure. The CIT(A) reduced this disallowance to Rs. 52,33,041.00. The assessee argued that the repair expenses were fully disclosed in the return and were debatable as to whether they should be treated as revenue or capital expenditure. The Tribunal noted that similar penalties on the same issue had been deleted in the assessee's own cases for previous assessment years (1993-94, 1998-99, and 1999-2000) following the decision of the Hon'ble Supreme Court in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC).

2. Imposition of Penalty Under Section 271(1)(c) of the Income Tax Act, 1961:
The A.O. initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income leading to concealment of income on several additions, including the disallowance of repair expenses. The CIT(A) deleted the penalty on some disallowances but sustained it for the repair expenses treated as capital expenditure. The assessee argued that the penalty was not leviable as the issue was debatable, and full disclosure was made in the return. The Tribunal referred to the consistent view held in the assessee's previous cases and the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which stated that mere making of a claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars. The Tribunal also cited various judgments, including those from the Hon'ble Delhi High Court, which held that when a legal issue is debatable, penalty provisions under Section 271(1)(c) should not be invoked. The Tribunal concluded that there was no concealment on the part of the assessee and deleted the penalty imposed by the A.O. and sustained by the CIT(A).

Conclusion:
The Tribunal allowed the assessee's appeal, deleting the penalty imposed under Section 271(1)(c) for the disallowance of repair expenses treated as capital expenditure, based on the consistent view in similar cases and the Supreme Court's ruling that a debatable claim does not warrant penalty for furnishing inaccurate particulars.