2015 (9) TMI 1345 - AT - Income Tax

Penalty under section 271(1)(c) - claim of deduction under section 80IB(9) - CIT(A) deleted the penalty - Held that - In the present case, the plea of the assessee was that such incomes have been earned in the course of carrying on its activity of exploration and extracting of oil and, therefore, the same was eligible for the claim of deduction under section 80IB(9) of the Act. Ofcourse, the Revenue has differed with the assessee on this aspect. The Hon ble Supreme Court in the case CIT vs. Reliance Petroproducts Pvt. Ltd.,(2010 (3) TMI 80 - SUPREME COURT) held that of furnishing inaccurate particulars in the context of section 271(1)(c) of the Act would mean a situation where any of the particulars filed by the assessee are found to be untrue or false. A mere rejection of claim made in the return of income without there being any falsity or untruth in the particulars filed would not invite penalty under section 271(1)(c) of the Act. CIT(A) made no mistake in deleting the penalty levied under section 271(1)(c), qua the denial of deduction under section 80IB(9) of the Act with respect to the incomes on account of interest, foreign exchange fluctuation gain and other income. - Decided against revenue. Disallowance of deduction claimed for exploration expenditure incurred for the business of prospecting for or extraction/production of oil under section 42(1) - Held that - In the present case the difference between the assessed and the reported income on the aforesaid aspect is based on varying perception of the scope of section 42(1) of the Act and it is not a case reflecting any concealment or furnishing Of inaccurate particulars by the assessee within the meaning of section 271(1)(c) of the Act. Therefore, on this aspect of the matter also we find no error on the part of CIT(A) in deleting the penalty levied by the Assessing Officer under section 271(1)(c) of the Act. - Decided against revenue.

Summary

Issues:
1. Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.
2. Denial of deduction under section 80-IB(9) of the Act.
3. Disallowance under sections 14A and 42 of the Act.
4. Exclusion of certain incomes for computing deduction under section 80IB(9).
5. Disallowance of deduction claimed for exploration expenditure under section 42(1) of the Act.

Analysis:

Issue 1:
The appeal pertains to the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Revenue challenged the deletion of the penalty by the CIT(A) in the case of the respondent assessee, a company engaged in crude oil and gas business for the assessment year 2007-08.

Issue 2:
The denial of deduction under section 80-IB(9) of the Act was a key point of contention. The Assessing Officer disallowed the deduction, leading to a penalty imposition. However, the Tribunal had earlier deleted the additions forming the basis for the penalty, rendering it untenable. The CIT(A) upheld the deletion of penalty based on subsequent developments.

Issue 3:
Penalty imposition related to disallowances under sections 14A and 42 of the Act was also addressed. The Tribunal's order deleting the additions led to the conclusion that the penalty under section 271(1)(c) was not sustainable, as the basis for penalty no longer existed.

Issue 4:
The exclusion of certain incomes for computing deduction under section 80IB(9) was another area of dispute. The CIT(A) deleted the penalty, emphasizing that a mere rejection of a claim for deduction does not automatically warrant a penalty under section 271(1)(c) without evidence of inaccurate particulars or concealment of income.

Issue 5:
The disallowance of deduction claimed for exploration expenditure under section 42(1) of the Act was also contested. The disagreement between the assessee and the Revenue regarding the scope of the expenditure allowed under the Act did not amount to concealment or furnishing inaccurate particulars, as per the CIT(A)'s decision, which was upheld.

In conclusion, the appeal of the Revenue against the penalty imposition was dismissed, with the CIT(A)'s decision to delete the penalty on all four limbs of the additions being affirmed. The judgment highlighted the importance of establishing concealment or inaccurate particulars to invoke penalty provisions under section 271(1)(c) of the Income Tax Act, 1961.