2014 (8) TMI 518 - AT - Income Tax

Penalty u/s 271(1)(c) disallowance of expenditure - Under-valuation of work in progress - Excess claim of deduction u/s 80IC - Held that - The CIT(A) has deleted penalty because the assessee has claimed expenditure and the claim was not accepted or was not acceptable to the revenue that too by itself would not attract penalty u/s 271(1)( c) of the Act Relying upon CIT vs Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT the order of the CIT(A) for setting aside the penalty on account of part disallowance pertaining to claim of software expenses of the assessee is upheld Decided against Revenue. Under-valuation of work in progress Held that - As decided in assessee s own case for the earlier assessment year it has been held that AO has not brought on record any material to show that the assessee has furnished any Inaccurate particulars of income but on the contrary on the basis of estimation the AO has worked out the value of work-in-progress at a figure different from what is stated by the assessee which by no stretch of imagination can be equated with concealment of income so as to attract penal provisions it cannot be said that there was conscious malafide act of the assessee for concealment of particulars of income so as to attract the penalty u/s 271(1)( c) of the Act Decided against Revenue. Excess claim of deduction u/s 80IC Held that - Merely because of part disallowance on account of re-computation of deduction u/s 80IC of the Act it cannot be said that the assessee concealed or furnished wrong particulars of its income which attracts penalty u/s 271(1)(c) of the Act because part disallowance of claim of assessee cannot be said to be a conscious and mala fide act of concealment or furnishing of inaccurate particulars of its income because the disallowance made by the AO on deduction claimed by the assessee u/s 80IC of the Act was finally made on the direction of the Tribunal to the AO to recompute the deduction of the assessee after furnishing and examining relevant facts and material Decided against Revenue.

Summary

Issues involved:
- Appeal against orders of CIT(A)-XII for AYs 2006-07, 2007-08, and 2008-09
- Deletion of penalties imposed by AO on quantum amounts confirmed by ITAT/CIT(A)

Analysis:

1. Penalty Deletion on Account of Software Expenses:
The AR argued that the disallowance on software expenses does not warrant a penalty as per the decision in CIT vs Reliance Petroproducts Pvt. Ltd. The CIT(A) upheld this argument, stating that a mere disagreement on claimed expenses does not constitute concealment of income. The tribunal agreed, emphasizing that the legislative intent does not support penalties for every disallowed claim. Consequently, the penalty was deleted for all three years.

2. Under-Valuation of Work in Progress (WIP):
Regarding the under-valuation of WIP, the tribunal referred to a previous case where it was established that the AO failed to prove inaccurate particulars of income. The tribunal concurred with the CIT(A) in deleting the penalty, as the valuation discrepancy did not indicate intentional concealment of income, thereby upholding the penalty deletion for AY 2006-07.

3. Penalty on Excess Claim of Deduction u/s 80IC:
The DR argued that the excess deduction claim under section 80IC warranted a penalty. However, the CIT(A) relied on a Supreme Court decision and a High Court case to delete the penalty, emphasizing that a debatable deduction issue does not amount to concealment. The tribunal upheld this decision, concluding that the disallowance of deductions did not signify intentional concealment, leading to the dismissal of the penalty for all three assessment years.

In conclusion, the tribunal dismissed all appeals by the revenue, affirming the CIT(A)'s decisions to delete the penalties imposed by the AO. The tribunal found no grounds to interfere with the penalty deletions, emphasizing that the disallowances and additions made by the revenue did not amount to deliberate concealment of income. The orders were pronounced in favor of the assessee on 7.8.2014.