2015 (5) TMI 906 - AT - Income Tax

Penalty u/s 271(1)(c) - interest income received from fixed deposits was shown as business income - Held that - Revenue have not brought out any fact or allegation on record that the information given by the assessee in its return of income was either bogus or incorrect and hence the same is prescribed as correct which was not disputed by the AO. The CIT(A) also observed that the interest income received from fixed deposits was shown as business income on the basis of earlier years assessment orders under the bonafide belief that such income is assessable as business income which was treated by the AO as income from other sources instead of business income during the quantum proceedings. In this situation, the addition was based on difference of opinion and when two views are possible the penalty u/s 271(1)(c) of the Act cannot be levied. Consultancy fee payment - The CIT(A) rightly accepted the explanation of the assessee that it has engaged a consultant to advise the assessee in business matters and also to advise about the sale of shares to a foreign entity or party. Therefore, the impugned amount of consultancy fee was debited under the head of legal and professional expenses which was claimed as business expenditure under a bonafide belief that the expenditure was incurred for business and the same was allowable against the business income. However, during the quantum proceedings, the claim of consultancy fee was allowed against the income of capital gains instead of income from business. In this situation, we safely observed that the claim of the assessee was not disallowed and the same was allowed against the income of capital gains instead of business income and thus, it cannot be held that either assessee has furnished inaccurate particulars of income or had concealed particulars of its taxable income with an intention to evade tax. Thus respectfully follow the decision of CIT vs. Reliance Petro Products (2010 (3) TMI 80 - SUPREME COURT ), wherein held that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue, that, by itself, would not attract penalty u/s 271(1)(c). However, in the present case, the claim of the assessee on both the counts was not dismissed at the threshold but both the claims of the assessee was allowed in a different head of income instead of the head of income adopted by the assessee in its return of income. Thus penalty deleted - Decided in favour of assesse.

Summary

Issues:
1. Whether the Commissioner of Income Tax (Appeals) was justified in deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the assessee furnished inaccurate particulars of income with the intention to evade taxes, warranting the penalty.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) setting aside the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act. The Revenue challenged the deletion of the penalty amounting to Rs. 33,81,821, questioning the justification of the CIT(A)'s decision.
2. The case involved the assessment of total income, where discrepancies were found in the treatment of interest income and consultancy fee by the assessee. The Assessing Officer disallowed the consultancy fee claimed as business expenditure and treated the interest income from fixed deposits as income from other sources. Subsequently, penalty proceedings were initiated under section 271(1)(c) for furnishing inaccurate particulars of income with the intention to evade taxes.
3. The Departmental Representative argued that the assessee provided inaccurate particulars by misrepresenting interest income and consultancy fee, leading to the imposition of the penalty. On the other hand, the assessee contended that there was no concealment or suppression of facts, as all details were disclosed in the return of income. The assessee maintained a bona fide belief regarding the treatment of income and expenditure.
4. The CIT(A) relied on the decision of the Supreme Court in the case of CIT vs. Reliance Petro Products, emphasizing that mere disagreement on income treatment does not warrant a penalty under section 271(1)(c). The CIT(A) concluded that the assessee did not conceal income or provide inaccurate particulars, as the claims were based on genuine beliefs and disclosed in the return of income.
5. The Tribunal upheld the CIT(A)'s decision, noting that the assessee did not conceal income or furnish inaccurate particulars with the intent to evade taxes. The penalty was deemed unjustified, considering the genuine beliefs and disclosure of all relevant details by the assessee. The Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty.

In conclusion, the Tribunal upheld the decision to delete the penalty imposed under section 271(1)(c) based on the genuine beliefs and disclosure of all relevant details by the assessee, as highlighted in the CIT(A)'s order and supported by legal precedents.