2017 (12) TMI 1712 - AT - Income Tax

Penalty levied u/s. 271(1) (c) - omission to make a suo-motu disallowance u/s.43B(e) - AO put the assessee on notice as to how it could claim interest on loans taken from HDFC when such amount was not actually paid - HELD THAT - Assessee had offered the sum as income in the subsequent assessment year considering it as a cessation of liability. Interest to the extent of ₹ 1,55,00,000/- debited in Profit and Loss found specific mention in the Audit Report and Annual Accounts also. Thus, the omission to make a suo-motu disallowance u/s 43B(e) was in our opinion inadvertent and not with an intention of understating the income. That apart, assessee having mentioned the amount in its Audit Report and Annual Accounts, we cannot say that the particulars furnished by it were inaccurate. In our opinion, CIT (Appeals) was justified in relying the case of Price Waterhouse Coopers 2012 (9) TMI 775 - SUPREME COURT for deleting the penalty levied on the assessee. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for disallowances/additions made in the assessment.

Analysis:
1. Disallowance and Additions in Assessment:
- The appellant, engaged in garment business, declared a loss income in the return of income for the relevant assessment year.
- The assessment completed under section 143(2) of the Act resulted in disallowances and additions, including disallowance under sections 14A, 40(a)(i), 40(a)(ia), and non-payment of interest to the bank.
- The Assessing Officer issued a notice regarding penalty on the disallowances/additions, and after considering the reply, levied a penalty of ?50,28,975 under section 271(1)(c) of the Act.

2. Assessee's Appeal:
- The assessee contended that the interest not paid to the bank was disclosed in the Statutory Audit Report and there were no inaccurate particulars furnished.
- The assessee argued that it had substantial loss available for carry forward, and no benefit would have accrued from making a non-allowable claim under the Act.
- The assessee relied on the judgment of the Hon'ble Apex Court in Price Waterhouse Coopers vs. CIT, 348 ITR 306.

3. Commissioner's Decision:
- The Commissioner held that Explanation 4(a) of section 271(1)(c) was not applicable, as the sum in question was offered as remission of liability in a previous assessment year.
- The Commissioner concluded that the claim was made inadvertently, and the penalty was deleted based on the judgment in Price Waterhouse Coopers case.

4. Appellate Tribunal's Decision:
- The Departmental Representative challenged the Commissioner's order, arguing that the claim for interest on loans from HDFC Bank was not paid and could only be claimed on actual payment basis.
- The Tribunal considered the submissions and the assessee's responses regarding the default in payment and subsequent treatment of the amount as income in a later year.
- The Tribunal found that the omission to disallow under section 43B(e) was inadvertent, and the particulars furnished were not inaccurate, upholding the Commissioner's decision to delete the penalty.

5. Conclusion:
- The Tribunal dismissed the Revenue's appeal and the assessee's cross objection as infructuous, affirming the deletion of the penalty by the Commissioner based on the inadvertent nature of the claim and the accurate disclosure in the Audit Report and Annual Accounts.

This detailed analysis covers the issues related to the penalty under section 271(1)(c) of the Income Tax Act and the subsequent decisions by the Commissioner and the Appellate Tribunal based on the facts and legal arguments presented by the parties involved.