2015 (7) TMI 295 - HC - Income Tax

Penalty under Section 271(1)(c) - disallowance of deduction in respect of the work done on the roof of the factory - ITAT delted penalty levy - Held that - Though the quantum appeal has been decided against the assessee, there is nothing to indicate that the respondent suppressed any fact or that the respondent misled the authorities. It was a legal contention. In these circumstances, the Tribunal s reliance upon the judgement of the Supreme Court in CIT Vs Reliance Petroproducts Pvt. Ltd., 2010 (3) TMI 80 - SUPREME COURT was well founded. Decided against revenue.

Summary

Issues:
1. Condonation of delay in refiling the appeal.
2. Exemption application.
3. Appeal against the order of the Income Tax Appellate Tribunal regarding penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2002-2003.

Condonation of Delay in Refiling the Appeal:
The delay of 360 days in refiling the appeal was condoned based on the reasons mentioned in the application. The appeal was disposed of after the delay was condoned.

Exemption Application:
The application for exemption was allowed subject to all just exceptions.

Appeal Against the Tribunal's Order:
The appeal was against the Income Tax Appellate Tribunal's order dated 20.05.2013, which dismissed the appellant's appeal against the order of the CIT (Appeals) setting aside the A.O's order imposing a penalty under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2002-2003. The respondent/assessee claimed a deduction for work done on the factory roof as a revenue expense, but it was held to be a capital expense in the quantum proceedings. The Tribunal agreed with the CIT (Appeals) that no penalty should be imposed as there was no concealment of facts. The assessee genuinely believed the expenses were on revenue account. The Tribunal upheld the decision, stating that penalty should not automatically follow a quantum appeal decision against the assessee. The Tribunal's reliance on a Supreme Court judgment was considered well-founded, as there was no indication of suppression of facts or misleading the authorities by the respondent. Despite earlier decisions in the respondent's favor, the appeal was dismissed as the discretion exercised by the authorities was deemed fair, reasonable, and not perverse.