2013 (11) TMI 1374 - HC - Income Tax

Transfer of plant and machinery to new industrial unit - Rejection of deduction u/s 80IA - Penalty u/s 271(1)(c) is leviable or not - Held that - The Assessee was under the bonafide impression, that since more than 80% of the cost at new factory was by installing new plant and machinery and only less than 20% of the cost was towards transferring the plant and machinery, it was entitled to benefit under Section 80-IA - Assessee has not concealed any fact from the authorities - Neither there is suppression of fact or misrepresentation of fact by the Assessee - For attracting penalty u/s 271(1)(c) men s rea is necessary - Decided against Revenue.

Summary

Issues:
1. Justification of deleting penalty u/s 271(1)(c) by ITAT despite disallowance of claim u/s 80IA.
2. Justification of deleting penalty based on the debatable nature of the claim.

Analysis:
1. The appeal challenged the Judgment and Order of the Income Tax Appellate Tribunal (ITAT) dated 05.09.2006. The High Court admitted the appeal based on substantial questions of law regarding the deletion of penalty u/s 271(1)(c) despite the disallowance of the assessee's claim u/s 80IA. The respondent-assessee had claimed deductions under Section 80IA for setting up a new plant and machinery at Kundaim. The Assessment Officer rejected this claim and imposed a penalty under Section 271(1)(c). The Commissioner of Income Tax (Appeal) dismissed the appeal regarding the deduction claim but allowed it concerning the penalty. The Tribunal dismissed the appeals on deductions but deleted the penalty. The High Court upheld the Tribunal's decision, emphasizing the lack of suppression or misrepresentation by the assessee, rendering the penalty unsustainable.

2. The High Court considered the respondent-assessee's claim that the plant and machinery were shifted from one location to another, justifying the benefit under Section 80IA. The court noted the expert advice obtained by the assessee supporting their interpretation of eligibility for the deduction. The Tribunal observed that for imposing a penalty, mens rea is necessary, and as there was no suppression or misrepresentation of facts by the assessee, the penalty was deemed unjustified. The court emphasized that interference with the Tribunal's order is warranted only if it is perverse or unsustainable in law, clarifying that having different views does not justify interference if the Tribunal's decision is well-reasoned. Consequently, the High Court dismissed the appeal, finding it without merit and upheld the Tribunal's decision to delete the penalty.

This detailed analysis highlights the legal intricacies surrounding the justification for deleting the penalty under Section 271(1)(c) by the ITAT and the High Court's decision in this case.