2015 (7) TMI 402 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance made u/s. 40(a)(ia) - CIT(A) deleted the levy - Held that - The conduct of the assessee speaks for itself. We, therefore, set aside the findings of the Ld. CIT(A) and uphold the levy of penalty u/s. 271(1)(c) of the Act in so far as it relates to the claim of capital expenditure as revenue expenditure. Since the levy of penalty is deleted in respect of disallowance made u/s. 40(a)(ia) of the Act, we restore this issue to the file of the AO with a direction to recompute the penalty in respect of the claim of capital expenditure as revenue expenditure. - Decided partly in favour of assessee Addition on account of under statement (unbilled) of Revenue - CIT(A) deleted the levy - Held that - - CIT(A) deleted the levy - Held that - pears that the First Appellate authority has been simply carried away by the submissions made by the assessee that the issue is covered by the earlier order of the Tribunal. It is clear that the Ld. CIT(A) has decided the issue in favour of the assessee without understanding the facts of the case and without comparing it with the facts of the earlier assessment year. This make the order of the Ld. CIT(A) erroneous. In the interest of justice and fair play, we restore this issue to the file of the Ld. CIT(A) to be decided afresh - Decided in favour of assessee for statistical purpose.

Summary

Issues:
1. Deletion of penalty levied by the AO under section 271(1)(c) of the Act for assessment years 2007-08 and 2009-10.
2. Disallowance of revenue expenditure on meter equipment and penalty levied under section 271(1)(c) of the Act.
3. Deletion of addition made under section 40(a)(ia) of the Act and penalty levied for overstatement of expenditure.

Analysis:

Issue 1: Deletion of Penalty for Assessment Years 2007-08 and 2009-10
The Revenue appealed against the deletion of penalty by the Ld. CIT(A) under section 271(1)(c) of the Act. The AO disallowed a significant amount paid by the assessee to certain entities, but the Tribunal had previously deleted this addition. The Ld. CIT(A) correctly held that no penalty could be levied as the quantum additions were removed by the Tribunal. The Revenue challenged this decision, arguing that penalty should be imposed for overstatement of expenditure. However, the Ld. Counsel for the assessee contended that no inaccurate particulars were filed, and all facts were disclosed. The Tribunal found that the assessee's conduct indicated awareness of the issue but failed to rectify it, leading to upholding the penalty for misrepresentation of expenditure.

Issue 2: Disallowance of Revenue Expenditure on Meter Equipment
The AO disallowed a revenue expenditure claimed by the assessee for meter equipment, leading to penalty proceedings under section 271(1)(c) of the Act. The AO found that the assessee had misrepresented capital expenditure as revenue, resulting in an overstatement of expenses. The Ld. CIT(A) deleted the penalty based on the assessee's disclosure, citing relevant legal precedents. However, the Tribunal overturned this decision, emphasizing the assessee's failure to rectify the issue despite being aware of it, ultimately upholding the penalty.

Issue 3: Deletion of Addition under Section 40(a)(ia) of the Act
The Revenue contested the deletion of an addition made under section 40(a)(ia) of the Act for overstatement of expenditure. The Ld. CIT(A) had followed a previous Tribunal order in favor of the assessee, but the Tribunal found the facts of the current case distinct from earlier assessments. The Tribunal noted discrepancies in the Ld. CIT(A)'s decision, directing a fresh assessment based on the specific facts of the year under consideration. The appeal for the assessment year 2007-08 was partly allowed, and for the assessment year 2009-10, it was treated as allowed for statistical purposes.

In conclusion, the Tribunal upheld penalties for misrepresentation of expenditure while directing a reassessment for the deletion of additions under section 40(a)(ia) of the Act. The judgment emphasized the importance of accurate disclosure and rectification of errors to avoid penalties under the Income Tax Act.