2015 (10) TMI 2174 - AT - Income Tax

Penalty u/s 271(I)(c) - disallowances of deduction u/s 80IB - Held that - The issue with regard to deduction u/s 80IB has been sent to the file of AO by ITAT. In view of these facts, the levy of penalty with respect to this disallowance is hereby cancelled. The AO is at his liberty to initiate the penalty on this issue, after re-deciding this issue Disallowance on account of interest - Held that - It is seen by us from the order of ITAT that this disallowance has been deleted. Thus, the whole premise of levy of penalty on this issue ceases to exist. The very basis of levy of penalty is no more in existence, thus penalty cannot remain alive any more. - Decided in favour of assessee Disallowance of deduction u/s 80 HHC - Held that - When the AO has found that penalty was not leviable with respect to similar disallowance made for deduction u/s 80HHC in A.Y. 2003-04, then following the same yardsticks, he should not take a different stand in this year and burden the assesse with rigorous provisions of penalty. - Decided in favour of assessee AO has made disallowance on the basis of return of income filed by the assessee and audit report of the assessee. The assessee has made its claim in the profit and loss accounts and computation sheet giving complete facts and particulars. Thus, it cannot be said that there was concealment of facts. The assessee had made a claim, duly supported with the audit report from the qualified accountant. The claim was not found allowable by the AO, in his opinion. Under these facts and circumstances, Hon ble Supreme Court in the case of Reliance Petroproducts Pvt Ltd (2010 (3) TMI 80 - SUPREME COURT), has held that it would not be a fit case for levy of penalty. Merely because the claim of the assessee was not found allowable by the AO in its opinion, it should not ipso facto give rise to an inference that there was concealment of income or furnishing of inaccurate particular of income by the assessee. The Assessee cannot be fastened with the liability of penalty without there being a clear or specific charge. Fixing a charge in a vague and casual manner is not permitted under the law. Fixing the twin charges is also not permitted under the law. - Decided in favour of assessee

Summary

Issues involved:
1. Levy of penalty under section 271(I)(c) of the Income Tax Act for assessment year 2004-05.
2. Disallowance of deductions under sections 80IB and 80HHC.
3. Consideration of penalty on various disallowances made by the Assessing Officer (AO).

Analysis:

Issue 1: Levy of Penalty under Section 271(I)(c)
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2004-05. The grounds of appeal included challenging the penalty of Rs. 22,08,681 levied under section 271(I)(c) of the Income Tax Act. The Appellate Tribunal noted that the issue related to the disallowance of deductions under sections 80IB and 80HHC.

Issue 2: Disallowance of Deductions under Sections 80IB and 80HHC
a. The Tribunal observed that the disallowance of Rs. 53,16,657 under section 80IB was sent back to the AO by the ITAT. Consequently, the penalty on this disallowance was canceled, allowing the AO to re-decide the issue.
b. Regarding the disallowance of Rs. 3,44,238 under section 80HHC, the Tribunal found that penalty would not be justified. It was highlighted that the AO's approach of levying penalties in a blanket manner without specific findings for each issue was incorrect. The Tribunal emphasized the need for a meticulous examination before imposing penalties and concluded that the penalty on this disallowance was unjustified and, therefore, deleted.

Issue 3: Consideration of Penalty on Various Disallowances
a. The Tribunal dismissed the penalty on the wrong claim of Rs. 76,113 as it was not pressed by the counsel.
b. The penalty of Rs. 3,75,000 for disallowance on account of interest was deleted as the disallowance itself had been removed. The Tribunal reasoned that without the basis for the penalty, it could not be sustained.

In conclusion, the Tribunal partly allowed the appeal of the assessee, highlighting inconsistencies in the AO's approach to levying penalties and emphasizing the need for a clear and specific charge before imposing penalties. The judgment underscored the importance of a thorough examination of each issue separately before penalizing the assessee.