2015 (12) TMI 186 - AT - Income Tax

Penalty under Section 271(1)(c) - CIT(A) deleted the levy - Held that - A perusal of the penalty order shows that the penalty has been levied for alleged offence of concealing the particular of income but we find that the Assessing Officer had not given a finding in the penalty order as to how and in what manner the respondent assessee company had furnished inaccurate particulars of income resulting in addition to the returned income except making the bald charge against the respondent assessee company that it had furnished inaccurate particulars of income. In the absence of such finding, the penalty order is liable to be quashed. Mere additions to the returned income would not per se tantamount to furnishing of inaccurate particulars of income so as to attract the penalty under Section 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues:
Appeal against deletion of penalty under Section 271(1)(c) of the Income-tax Act for assessment year 2001-02.

Analysis:
1. The appeal was filed by the Revenue against the order of CIT(A) deleting the penalty of Rs. 1,13,46,367/- imposed under Section 271(1)(c) of the Income-tax Act for the assessment year 2001-02. The Revenue contended that the CIT(A) erred in deleting the penalty.

2. The respondent assessee company, engaged in software development, filed a return for the assessment year 2001-02 showing a net loss. The assessment was completed disallowing certain expenses and losses. The additions made in the assessment were confirmed by the CIT(A) and the ITAT. Subsequently, the Assessing Officer levied a penalty for concealing income, which was deleted by the CIT(A) based on the decision of the Supreme Court in CIT Vs. Reliance Petro Products Pvt. Ltd.

3. The Revenue argued that the CIT(A) was not justified in deleting the penalty as the additions were confirmed by higher authorities, and the respondent did not pursue the matter further. On the other hand, the counsel for the assessee relied on the CIT(A) order.

4. The Tribunal considered whether the CIT(A) was justified in deleting the penalty. It observed that the penalty order lacked a finding on how the assessee furnished inaccurate particulars of income. Citing various precedents, the Tribunal emphasized that mere additions to the returned income do not automatically imply inaccurate particulars of income for penalty under Section 271(1)(c).

5. Referring to legal judgments, including the case of CIT Vs. Reliance Petroproducts Pvt. Ltd., the Tribunal highlighted that a claim rejected for lack of merit does not necessarily indicate inaccurate particulars of income. The Tribunal also noted that when all facts relating to a claim were disclosed, disallowance of the claim does not imply concealment of income.

6. Relying on the reasoning in the above cases, the Tribunal upheld the CIT(A)'s decision to delete the penalty. It dismissed the Revenue's appeal, concluding that the penalty was not justified based on the facts and legal principles discussed.

7. Ultimately, the Tribunal sustained the order of CIT(A) deleting the penalty, and the appeal filed by the Revenue was dismissed. The decision was pronounced on 4.11.2015.