2015 (1) TMI 961 - AT - Income Tax

Penalty u/s 271(1)( c) - disallowance of deduction u/s 80IB on income the assessee has concealed the particulars of its income or filed inaccurate particulars of income - Held that - . The assessee has filed revised return of income. The assessee has not claimed the deduction u/s80IB. We find that the penalty u/s271(1)( c) is not leviable merely because the disallowance of particular claim made by the assessee was upheld. We find that the assessee has raised a bonafide claim, which was ultimately accepted in assessment year 2005-06. Therefore, when the assessee has claimed the deduction under bonafide and all the facts were disclosed before the department, it cannot be said that the assessee had concealed its particulars of income and no penalty can be levied. Therefore, we find that the assessee has made a bonafide claim and the issue was in favour of the assessee. Therefore, we are of the view that the ld.CIT(A) has taken a view that assessee has bonafide claim, which was disallowed and no penalty can be levied. Therefore, we are of the view that the ld.CIT(A) is justified in deleting the penalties levied u/s271(1) (c ) of the Act for the assessment years 2007-08 and 2008-09. - Decided in fvaour of assessee.

Summary

Issues Involved:
1. Deletion of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Claiming excessive deduction under Section 80IB.
3. Applicability of Supreme Court decision in Union of India vs. Dharmendra Textile Processors.

Issue-wise Detailed Analysis:

1. Deletion of Penalty Levied under Section 271(1)(c) of the Income Tax Act:

The department appealed against the deletion of penalties amounting to Rs. 22,82,907/- and Rs. 23,74,360/- levied under Section 271(1)(c) for the assessment years 2007-08 and 2008-09. The penalties were initially imposed for allegedly concealing particulars of income or furnishing inaccurate particulars by claiming excessive deductions under Section 80IB. The assessee argued that the claims were made under a genuine belief and were fully disclosed in the returns. The CIT(A) accepted the assessee's explanation, noting that the claims were not made with any willful intent to evade taxes and that the assessee had filed revised computations for subsequent years, demonstrating bona fide intentions. The tribunal upheld the CIT(A)'s decision, concluding that the penalty was not warranted as the claims were made in good faith and based on the auditor's report.

2. Claiming Excessive Deduction under Section 80IB:

The assessee, a private limited company engaged in the manufacture and sale of dry dispersion cellulose ether and film coating material, claimed deductions under Section 80IB amounting to Rs. 26,15,61,571/- and Rs. 9,98,07,749/- for the respective assessment years. The claims included provisions for doubtful debts written off, interest income, income from insurance claims, and income from the sale of scrap. The AO disallowed these claims, arguing they did not relate to manufacturing activities. The CIT(A) observed that the assessee had disclosed all relevant material facts and had made the claims under a bona fide belief, supported by various judicial precedents. The tribunal agreed, stating that the disallowance of claims does not automatically lead to penalties, especially when the claims were made transparently and based on a reasonable interpretation of the law.

3. Applicability of Supreme Court Decision in Union of India vs. Dharmendra Textile Processors:

The department relied on the Supreme Court decision in Union of India vs. Dharmendra Textile Processors to justify the imposition of penalties under Section 271(1)(c). However, the tribunal noted that the case at hand involved bona fide claims made by the assessee, supported by judicial precedents and auditor's certificates. The tribunal emphasized that penalties under Section 271(1)(c) are not automatic and require evidence of willful concealment or furnishing of inaccurate particulars, which was not present in this case.

Conclusion:

The tribunal dismissed the department's appeals, upholding the CIT(A)'s decision to delete the penalties for both assessment years. The tribunal recognized the assessee's bona fide belief in claiming the deductions and noted that the claims were made transparently and supported by legal and factual bases. The order was pronounced in the open court on 20-01-2015.