2016 (11) TMI 1559 - AT - Income Tax

Penalty u/s.271(1)(c) - expenditure incurred for obtaining the bank loan - revenue v/s capital expenditure - Held that - Expenditure was incurred for obtaining the bank loan. Merely, because AO has considered the expenses as capital in nature, same does not amount to furnishing of any inadequate particulars of income, therefore, not liable to penalty u/s. 271(1) ( c). Disallowing the expenditure genuinely incurred for the purpose of business merely on the plea of prior period expenses will not attract penalty u/s.271(1)( c) - full details regarding franking charges, foreign exchange loss were filed before the lower authorities. There was no concealment of any particulars of income. Merely disallowance of claim does not amount to furnishing of inadequate particulars of income nor concealment of income. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty u/s.271(1)(c) of the IT Act for assessment year 2010-11.

Detailed Analysis:
The appeal was filed against the order of the CIT(A) regarding the imposition of penalties under section 271(1)(c) of the IT Act for the assessment year 2010-11. The Assessing Officer (AO) had made disallowances on various grounds, including franking charges paid on a term loan, foreign exchange loss on import of machinery, and payment of bills pertaining to earlier years. Subsequently, penalties were levied by the AO, which were confirmed by the CIT(A), leading to the appeal before the Appellate Tribunal ITAT Mumbai.

Upon considering the rival contentions, the Tribunal found that the expenses incurred, such as franking charges, were for obtaining a bank loan and were genuinely related to business purposes. Merely because the AO treated these expenses as capital in nature did not amount to furnishing inadequate particulars of income, thus not warranting a penalty under section 271(1)(c). Similarly, disallowing expenses genuinely incurred for business on the grounds of prior period expenses did not attract penalties. The Tribunal noted that full details regarding the expenses were provided to the authorities, indicating no concealment of income or inadequate particulars furnished.

Citing the judgment of the Hon'ble Supreme Court in the case of Reliance Petroproducts Ltd., the Tribunal emphasized that for penalties under section 271(1)(c) to be imposed, there must be concealment of income or furnishing of inaccurate particulars. Merely making incorrect claims in law, which are not accepted by the revenue, does not automatically lead to penalties. The Tribunal highlighted that the details supplied in the return must be inaccurate or false for penalties to apply, which was not the case here. The Tribunal concluded that there was no merit for the imposition of penalties under section 271(1)(c) and directed the AO to delete the penalties.

In conclusion, the appeal of the assessee was allowed by the Appellate Tribunal ITAT Mumbai, and the penalties imposed under section 271(1)(c) for the assessment year 2010-11 were directed to be deleted.