2014 (11) TMI 105 - HC - Income Tax

Penalty u/s 271(1)(c) set aside Inaccurate particulars furnished or not - Held that - The Tribunal was rightly of the view that there is no mala fide on the part of the assessee in putting forth claim for depreciation and it would not constitute furnishing of inaccurate particulars, there was no justification to interfere with the material finding of fact - no direction was issued to initiate penalty proceedings in COMMISSIONER OF INCOME TAX AND ANOTHER vs MANJUNATHA COTTON AND GINNING FACTORY 013 (7) TMI 620 - KARNATAKA HIGH COURT it has been held that the condition precedent for initiation of penalty proceedings u/s 271(1)(c) is existence of condition referred to in the section - The person initiating penalty proceedings should be satisfied about the existence of the conditions which should be reflected in the assessment orders passed by them - The Section (1B) is attracted and these conditions deemed to exist which confers jurisdiction on him to initiate penalty proceedings - in the absence of a specific direction to initiate penalty proceedings, the initiation of the proceedings is bad thus the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Dismissal of appeal against order setting aside penalty imposed by assessing authority.
2. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.
3. Justification for setting aside penalty proceedings by the Commissioner of Income Tax.
4. Tribunal's view on erroneous claim and penalty imposition.
5. Effect of absence of specific direction to initiate penalty proceedings.

Analysis:
1. The appeal was filed against the order of the Tribunal which dismissed the appeal filed against the first appellate authority's decision to set aside the penalty imposed by the assessing authority.

2. The assessing authority, after framing the assessment order, mentioned the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act without a specific direction. Despite this, a penalty was imposed for furnishing inaccurate particulars. The Commissioner of Income Tax later set aside the penalty, stating that there was no deliberate intention to furnish inaccurate particulars by the assessee.

3. The Commissioner of Income Tax justified setting aside the penalty proceedings by emphasizing that the claim for higher depreciation was supported by legitimate documentation related to the purchase of plant and machinery under the TUF Scheme, as confirmed by the IDBI and subsidy on interest.

4. The Tribunal held that an erroneous claim, which was not deliberate and would later be corrected, should not be subjected to penalty. As a result, the Tribunal dismissed the appeal filed by the revenue against the Commissioner's decision to set aside the penalty.

5. The High Court, in its judgment, referred to a previous case law to emphasize that the initiation of penalty proceedings under Section 271(1)(c) requires specific conditions to be met, including a clear direction or findings in the assessment order. In the absence of such direction, the initiation of penalty proceedings is deemed unjustified.

6. Ultimately, the High Court found no merit in the revenue's appeal, ruling in favor of the assessee and against the revenue. The appeal was dismissed based on the absence of a specific direction to initiate penalty proceedings, rendering the initiation of proceedings invalid.