2016 (2) TMI 378 - AT - Income Tax

Penalty under S.271(1)(c) - deduction under S.10A - CIT(A) allowed the appeal of the assessee for statistical purposes - Held that - Contention of the assessee right from the beginning against the penalties proposed is that the said claims under S.10A were made on account of typographical errors and incorrect advice of the Chartered Accountant. Even though the CIT(A) observed that this passing on of the blame on to the Chartered Accountant was only to get away from the penalty, the CIT(A), taking into account the appellate orders passed by her in the quantum proceedings emanating from the orders of the Assessing Officer under S.154, whereby she has directed the allowance of deductions under S.35(2AB) and S.35(1), held that if these deductions were allowed, the assessed income would become nil, and hence the quantum of penalty imposable for the years under appeal would also become nil . Since the quantum of penalty imposable thus would be nil in each of these years, the CIT(A) allowed the appeals of the assessee for statistical purposes. No material has been brought on record to controvert the finding of the CIT(A) that if the deductions under S.35(2AB) and S.35(1) are allowed for the years under appeal, the assessable income would be nil, and consequently, the penalty imposable would also be nil . When there is no variation to the total income determined, machinery provisions for calculation of tax sought to be evaded would fail. In that view of the matter, we find no infirmity in the impugned orders of the CIT(A). We accordingly uphold the same - Decided against revenue

Summary

Issues: Appeal against deletion of penalties under S.271(1)(c) for assessment years 2007-08 and 2008-09.

Analysis:
1. Facts and Background: The appeals were filed by the Revenue against the orders of the Commissioner of Income-tax (Appeals) II, Hyderabad, deleting penalties under S.271(1)(c) for assessment years 2007-08 and 2008-09. The assessee company, involved in Bio-technology, initially claimed deduction under S.10A but later withdrew it due to non-realization of export sales, opting for relief under S.35(2AB) of the Act.

2. Penalty Proceedings: The Assessing Officer initiated penalty proceedings under S.271(1)(c) due to the withdrawal of the deduction claim. The assessee explained that the claim was based on advice from its Tax Counsel, and upon realizing the error during assessment, it promptly rectified the mistake. However, the Assessing Officer imposed penalties citing inaccurate particulars of income leading to concealment.

3. Reasoning for Penalty: The Assessing Officer based the penalty on various grounds, including the failure to substantiate the deduction claim, lack of registration with STPI (Software Technology Parks of India), and attributing the claim to the Tax Counsel's advice. The Assessing Officer also referred to legal precedents supporting penalty imposition for concealment of income.

4. CIT(A) Decision: The CIT(A) acknowledged the penalty imposition but considered the revised claim under S.35(2AB) and rectification proceedings. If the deductions under S.35(2AB) and S.35(1) were allowed, the assessed income would be nil, leading to no penalty imposition. Consequently, the CIT(A) allowed the appeals for statistical purposes, as the penalty amount would be nil if the deductions were permitted.

5. Appellate Tribunal Decision: The Appellate Tribunal upheld the CIT(A) orders, emphasizing that if the deductions under S.35(2AB) and S.35(1) were accepted, the penalty would be nil. Since there was no variation in the total income, the machinery provisions for calculating tax evasion would fail. Thus, the Tribunal dismissed the Revenue's appeals, affirming the CIT(A) decision.

In conclusion, the Appellate Tribunal upheld the CIT(A) decision to delete penalties under S.271(1)(c) for the assessment years 2007-08 and 2008-09, based on the allowance of deductions under S.35(2AB) and S.35(1) resulting in a nil assessed income and consequently, no penalty imposition.