2014 (4) TMI 476 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Disallowance u/s 40(a)(ia) of the Act Held that - The assessee furnished return declaring a loss of Rs. 7,96,49,700 - The AO determined the loss at Rs. 54,51,48,532 - though the certain disallowances were made u/s 40(a) and 40(a)(i), the set off given by the AO on account of disallowances made in the preceding year was much more than the disallowances made in the year under consideration - major disallowances have been made because of the assessee s failure to deduct and pay the tax in time - though the deduction claimed has been disallowed in one year, the same has been allowed in the subsequent year - The head office expenses have been disallowed on the ground that the assessee could not give satisfactory explanation to substantiate the claim of expenditure Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - merely because certain claim of expenses is disallowed cannot be sufficient for levying the penalty u/s 271(1)(c) Decided against Revenue.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) for inaccurate particulars.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Delhi pertained to the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2006-07. The primary issue raised by the Revenue was whether the CIT(A) erred in deleting the penalty by holding that the assessee did not furnish inaccurate particulars. The Assessing Officer had levied a penalty of Rs. 70,19,223 based on disallowances under various sections. The CIT(A) canceled the penalty citing the decision of the Honorable Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. The Revenue challenged this decision before the ITAT, arguing that the penalty should not have been deleted.

The facts of the case revealed that the assessee, a UK-incorporated company, initially declared a loss of Rs. 7,96,49,700, which was later determined by the Assessing Officer at Rs. 54,51,48,532 due to certain disallowances. It was noted that while some disallowances were made, the set-off provided by the Assessing Officer for preceding year disallowances exceeded the current year's disallowances, resulting in a higher determined loss than the one declared. The disallowances were primarily related to the failure of the assessee to deduct and pay taxes on time, and certain expenses were disallowed due to lack of substantiation. The ITAT observed that there was no allegation of inaccurate particulars or false details furnished by the assessee. Relying on the Supreme Court's decision, the ITAT upheld the CIT(A)'s order, emphasizing that the mere disallowance of certain claims does not automatically warrant a penalty under section 271(1)(c).

Ultimately, the ITAT dismissed the Revenue's appeal, affirming the decision to delete the penalty imposed under section 271(1)(c) as the assessee did not furnish inaccurate particulars. The judgment was pronounced on 11th April, 2014, by the ITAT Delhi.