2014 (1) TMI 654 - AT - Income Tax

Deletion of Penalty u/s 271(1)(c) of the Act Held that - Following COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars and in Dilip N. Shroff Versus Joint Commissioner of Income-tax And Another 2007 (5) TMI 198 - SUPREME Court - A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - Such claim made in the Return cannot amount to the inaccurate particulars - Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under Section 271(1)(c) Decided against Revenue.

Summary

Issues:
- Appeal against deletion of penalty u/s 271(1)(c) of the Act for A.Y. 2007-08 due to non-deduction of TDS on freight payment.

Detailed Analysis:

1. Issue of Penalty Imposition:
- The Revenue filed an appeal against the deletion of penalty u/s 271(1)(c) for the A.Y. 2007-08 due to non-deduction of TDS on freight payment by the assessee.
- The Assessing Officer disallowed the entire freight charges of Rs. 20,61,434/- for non-deduction of TDS u/s 40a(ia) and imposed a penalty u/s 271(1)(c) on the assessee.

2. CIT(A) Decision and Rationale:
- The CIT(A) referred to a similar case by the I.T.A.T. and observed that non-deduction of TDS does not amount to concealment of income or furnishing inaccurate particulars.
- The CIT(A) noted that the disallowance under section 40(a)(ia) was due to a technical breach, not deliberate concealment, and hence deleted the penalty.
- The CIT(A) emphasized that the disallowance was compensated by the payment of tax on the amount, making the freight expense genuine business expenditure.

3. Appellant's Arguments and Counter-arguments:
- The Revenue argued that the penalty was justified as the assessee failed to deduct TDS on freight payment.
- The assessee contended that the freight payment was genuine, and the non-deduction of TDS was a technical lapse, not deliberate default justifying penalty imposition.

4. Judicial Precedents and Supreme Court Decisions:
- The Tribunal cited various judicial precedents where penalties were not justified for technical lapses like non-deduction of TDS, especially when the additional income was offered by the assessee in good faith.
- The Supreme Court rulings highlighted that incorrect claims in law do not necessarily amount to furnishing inaccurate particulars, and penalties should not be imposed for every disallowed claim by the Assessing Officer.

5. Final Tribunal Decision:
- The Tribunal upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) based on the totality of facts, judicial pronouncements, and the genuine nature of the freight payment.
- The appeal of the Revenue against the deletion of penalty was dismissed, affirming the decision of the lower authorities.

This detailed analysis showcases the legal journey surrounding the imposition and deletion of the penalty under section 271(1)(c) for non-deduction of TDS on freight payment, emphasizing the technical nature of the lapse and the absence of deliberate concealment or inaccurate particulars by the assessee.