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2013 (5) TMI 390 - AT - Income TaxPenalty u/s 271(1)(c) Whether penalty can be levied if the returned income is a loss? - As per ld. CIT (A) levy of penalty on addition to the returned loss which result in reduction of loss was not on statute in the year under consideration as it was introduced w.e.f. 01.04.2003 therefore deleted. Revenue made addition in income on account of interest paid by the appellant company on the bank borrowing which was partly utilized for advancing security deposit of Rs.1 crore to M/s Concast India Ltd for use of their premises as per agreement by the appellant company. Revenue appeal against the order. Held that - As rightly considered by the learned CIT (A) Just because an addition was confirmed in assessment, that itself does not lead to levy of penalty under section 271(1)(c) as held by the Hon ble Supreme Court in the case of Reliance Petroproducts Ltd 2010 (3) TMI 80 - SUPREME COURT . The Revenue is contesting only on legal principles. Even though the legal principle relied on by the learned CIT (A) was no longer valid consequent to the decision of the Hon ble Supreme Court in the case of CIT vs. Gold Coin Health Food (P) Ltd. 008 (8) TMI 5 - SUPREME COURT that even in loss cases penalty is leviable as Explanation 4 will apply, the CIT (A) deleted the penalty also on merits which was not contested. Thus, the findings of the CIT (A) was upheld. AO was not justified in his action.
Issues:
- Appeal against deletion of penalty under section 271(1)(c) by CIT (A) - Disallowances made during assessment under section 143(3) of the Act - Applicability of Explanation 4 to section 271(1)(c) introduced by Finance Act, 2002 - Justification for levy of penalty by Assessing Officer (AO) - Submission before CIT (A) regarding disallowance on interest paid to the Bank of Tokyo Ltd - CIT (A)'s decision to delete the penalty - Legal principles governing the levy of penalty under section 271(1)(c) - Applicability of Explanation 4 in cases of returned loss Analysis: The case involves an appeal against the deletion of a penalty under section 271(1)(c) by the CIT (A) concerning disallowances made during the assessment under section 143(3) of the Act. The Revenue contested the deletion of the penalty, arguing that the levy was justified under Explanation 4 to section 271(1)(c) introduced by the Finance Act, 2002. The Assessing Officer (AO) had levied the penalty based on Explanation 1 to section 271(1)(c) after confirming certain additions during assessment. During the proceedings, the appellant company submitted that the interest paid to the Bank of Tokyo Ltd was for business purposes, supported by various reasons such as low rent for office space due to a security deposit arrangement with Concast India Ltd. The CIT (A) examined the facts and submissions, ultimately deleting the penalty. The CIT (A) noted that the appellant had disclosed all relevant facts in the return of income and had not intentionally concealed any particulars of income. The Tribunal upheld the CIT (A)'s decision, emphasizing that the mere disallowance of a claim does not automatically warrant a penalty under section 271(1)(c). The Tribunal referenced legal precedents, including the case of Reliance Petroproducts Ltd, to support its conclusion that penalty imposition requires intentional concealment of income. Despite the applicability of Explanation 4 to section 271(1)(c) in loss cases, the Tribunal found that the appellant had not concealed income intentionally, leading to the dismissal of the Revenue's appeal. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the penalty. The order was pronounced in open court on 5th April 2013.
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