2015 (10) TMI 1475 - AT - Income Tax

Penalty under section 271(1)(c) - Held that - Undoubtedly, it is not the case of either any concealment of income or furnishing of inaccurate particulars of income. As we see, it is not the case of any revenue loss either. When we look at the decision of Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT the hon ble Supreme Court has very categorically held that penalty cannot be visited if the details and particulars had been placed on record. We find that the assessee made the claim in its return of income, which the Revenue authorities interpreted differently. This means that only on the facts, there was a difference in opinion, as to how to characterise the income/loss. In such a case, where there is a difference of opinion amongst the Revenue authorities themselves, penalty, in such a case is not exigible. We, therefore, set aside the order of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to cancel the penalty. - Decided in favour of assessee.

Summary

Issues:
Claim of bad debt as business loss, levy of penalty under section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars of income.

Analysis:
The appeal before the Income-tax Appellate Tribunal involved two primary issues. Firstly, it concerned the classification of a claimed bad debt as either a capital loss or a business loss. The appellant had given an unsecured loan to a joint venture partner for business purposes, which became irrecoverable due to the dissolution of the joint venture. The Assessing Officer treated it as a capital loss, while the Commissioner of Income-tax (Appeals) classified it as a business loss but did not allow the claim of bad debt. The Tribunal upheld the Commissioner's decision, considering it a business loss.

Secondly, the Tribunal addressed the penalty imposed under section 271(1)(c) for alleged concealment of income. The Assessing Officer initiated penalty proceedings as the explanation provided by the assessee was deemed not bona fide. The Commissioner of Income-tax (Appeals) upheld the penalty, relying on a Supreme Court decision stating that mens rea is not necessary for penalty under the Income Tax Act. However, the Tribunal disagreed with this interpretation. The Tribunal noted that there was no concealment of income or furnishing of inaccurate particulars, and the dispute arose due to a difference in interpretation between the assessee and the Revenue authorities. Citing relevant Supreme Court judgments diluting the earlier decision, the Tribunal ruled that in cases of difference of opinion where details were on record, penalty was not warranted. Consequently, the Tribunal set aside the penalty imposed by the Commissioner of Income-tax (Appeals) and directed the Assessing Officer to cancel it.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the penalty was not justified in the absence of concealment or inaccurate particulars of income, and the difference in opinion regarding characterization of income/loss did not warrant a penalty under section 271(1)(c).