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2014 (1) TMI 910 - AT - Income TaxDeletion of penalty u/s 271(1)(c) of the Act Held that - The Assessing Officer has nowhere alleged that the payment of interest made to finance company on which the TDS was deductable is non genuine or bogus - It is also a fact that there is nothing on record or alleged that the payment of interest is excessive or unreasonable - The disallowance has been made for non-deduction of TDS in view of provisions of section 40(a)(ia) - The legal fiction created by section 40(a)(ia) will not attract penalty for furnishing of inaccurate particulars of income because there is no inaccurate particulars in the return of income. Relying upon CIT Vs. Mother India Refrigeration Pvt. Ltd. 1985 (8) TMI 2 - SUPREME Court - legal fictions are created only for some definite purpose and they must be limited to that purpose and should not be extended beyond that legitimate field - Further in CIT Vs. Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - merely because the Assessee has claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract penalty u/s 271(1)(c) there was no reason to interfere with the order of CIT(A) Decided against Revenue.
Issues involved:
1. Penalty under section 271(1)(c) for non-deduction of TDS and other additions made by the Assessing Officer. 2. Deletion of penalty by CIT(A) on the additions made under section 40(a)(ia) based on various decisions cited by the Assessee. 3. Dispute regarding the applicability of legal fiction created by section 40(a)(ia) for invoking penalty under section 271(1)(c). 4. Interpretation of relevant case laws by the Tribunal and High Court. Detailed Analysis: Issue 1: Penalty under section 271(1)(c) for non-deduction of TDS and other additions made by the Assessing Officer: The appeal filed by the Revenue was against the penalty order passed by the Assessing Officer under section 271(1)(c) for non-deduction of TDS on interest paid to a finance company and other additions. The CIT(A) partially granted relief to the Assessee by deleting the penalty on certain additions while confirming it on others, based on the explanations provided by the Assessee during the assessment proceedings. The Tribunal considered the arguments presented by both parties and upheld the decision of the CIT(A) to delete the penalty on the additions made under section 40(a)(ia) but confirmed it on other amounts where the Assessee failed to provide satisfactory explanations. Issue 2: Deletion of penalty by CIT(A) on the additions made under section 40(a)(ia) based on various decisions cited by the Assessee: The CIT(A) relied on various case laws cited by the Assessee to delete the penalty imposed by the Assessing Officer under section 271(1)(c) specifically related to the disallowance made under section 40(a)(ia) for non-compliance with TDS provisions. The CIT(A) accepted the Assessee's contention that the penalty on disallowance under section 40(a)(ia) was not justified, and therefore, restricted the penalty only to the additions where the Assessee failed to provide explanations. Issue 3: Dispute regarding the applicability of legal fiction created by section 40(a)(ia) for invoking penalty under section 271(1)(c): The Tribunal analyzed the legal fiction created by section 40(a)(ia) and its applicability in invoking penalty under section 271(1)(c). It was established that the legal fiction of section 40(a)(ia) for disallowance of expenditure due to non-deduction of TDS does not automatically lead to penalty for furnishing inaccurate particulars of income. The Tribunal emphasized that the penalty cannot be imposed solely based on disallowances made under section 40(a)(ia) without proving inaccurate particulars in the return of income. Issue 4: Interpretation of relevant case laws by the Tribunal and High Court: The Tribunal referred to various decisions, including those of the Hon. Supreme Court and the jurisdictional High Court, to support its decision in dismissing the Revenue's appeal. The Tribunal highlighted precedents where it was established that making incorrect claims in law or disallowances under section 40(a)(ia) do not necessarily attract penalties under section 271(1)(c). The Tribunal's decision was in line with the legal principles outlined in the relevant case laws, leading to the dismissal of the Revenue's appeal. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the legal reasoning behind the Tribunal's decision to dismiss the Revenue's appeal.
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