2014 (12) TMI 338 - AT - Income Tax

Maintainability in law of the penalty u/s 271(1)(c) Assessee complied with the show cause notices u/s.274 or not - Held that - If the assessee had filed its explanation, it is being admittedly not considered by the AO, he ought to have called for a remand report from him after verifying/ascertaining the veracity of the assessee s claim, toward which there is no finding - the same to be on facts the same as that assumed by the assessee at the assessment stage, which stands considered by the AO. Non-acceptance of assessee s claim of write off Held that - The CIT(A) s treatment of the assessee s appeal on merits is again cryptic and inconsistent with the facts of the case, even as he delineates the issue arising for consideration correctly, i.e., as to whether the assessee could be considered as having concealed or furnished inaccurate particulars of income He correctly framing the issue, does not explain if the conditions of Explanation 1, providing the circumstances under which the assessee would not be deemed to have concealed his income, and thus is to be read along with, stand satisfied or not. Concealment or furnishing inaccurate particulars Held that - The assessee has clearly stated to have, as a part of its existing business, also tried to promote young talent in the field of sports, as a separate division, since FY 2000-01, incurring expenditure on salaries, rent, etc. since that year - assessee s method of accounting, peculiar to its business, stands in fact accepted by the Revenue - there is no question of the assessee having failed to specify any event, which reason prevailed with the AO, so that a claim in its respect would arise only for the year in which the same stood incurred assessee rightly contended that the fixed assets also includes fixture and fittings, claim qua which may be valid, being in respect of rented premises - the question of the assessee s explanation being not found to be erroneous or false, in departure of the Revenue s case, would arise only after the assessee furnishes one thus, the matter is to be remitted back to the AO Decided partly in favour of revenue.

Summary

Issues:
1. Maintainability of penalty u/s.271(1)(c) of the Income Tax Act, 1961 for A.Y. 2003-04.

Detailed Analysis:

Issue 1: Maintainability of Penalty
The appeal concerns the levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 for A.Y. 2003-04. The Commissioner of Income Tax (Appeals) had deleted the penalty, prompting the Revenue to appeal. The primary issue revolves around the justification for the penalty imposed by the Assessing Officer (A.O.) and its subsequent deletion by the CIT(A). The penalty was related to the write-off of balances under various heads by an assessee-company engaged in sports event management and brand promotion. The A.O. disallowed certain expenses claimed by the assessee due to lack of specific event details and initiated penalty proceedings. The CIT(A) favored the assessee, citing that the explanation provided was not erroneous or false, leading to the penalty deletion. The Tribunal noted the importance of a plausible explanation for a claim to avoid penalty, emphasizing proper disclosure of all material facts by the assessee. The Tribunal disagreed with the A.O.'s reasoning regarding the disallowed expenses and directed relief for the assessee in part. The matter of advances made by the assessee was also remanded back to the A.O. for further examination and substantiation. The Tribunal partly allowed the Revenue's appeal and remanded the case for additional review.

This detailed analysis provides a comprehensive overview of the judgment, highlighting the key issues, arguments, and decisions made by the Tribunal regarding the maintainability of the penalty under section 271(1)(c) of the Income Tax Act, 1961 for the relevant assessment year.