2013 (2) TMI 896 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty levied u/s 271(1)(c) of the Act by CIT(A).

Summary:

Issue 1: Deletion of Penalty Levied u/s 271(1)(c) of the Act by CIT(A):

The appeals filed by the Revenue challenge the order of CIT(A) that deleted the penalty levied u/s 271(1)(c) of the Act for Assessment Years 2006-07 and 2007-08. The Revenue contended that the CIT(A) erred in deleting the penalty as the assessee furnished inaccurate particulars of income concerning the Double Income Tax Relief (DITR) claimed for the Hong Kong branch. The Assessing Officer (AO) had disallowed the DITR claim and initiated penalty proceedings for furnishing inaccurate particulars of income. The CIT(A) observed that the assessee's claim was based on a bona fide belief that the DTA provisions between India and China applied to Hong Kong, which later turned out to be incorrect. The CIT(A) held that the penalty u/s 271(1)(c) is not warranted as the claim was made based on prevailing circumstances and legal precedents, and the particulars of income were not found to be inaccurate.

The CIT(A) noted that penalty proceedings are distinct from assessment proceedings and must be strictly construed. The CIT(A) cited the Supreme Court decision in Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), which held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars of income. The CIT(A) also referenced the Supreme Court's clarification in Union of India v. Dharmendra Textiles and subsequent cases, emphasizing that penalty is not automatically leviable and must be independently established.

The Tribunal upheld the CIT(A)'s decision, confirming that the assessee had disclosed all particulars of income, and the error was in the computation of tax liability, not in the concealment of income. Consequently, the Tribunal dismissed the Revenue's appeals, affirming that no penalty u/s 271(1)(c) is legally leviable in this case.

Conclusion:
The appeals of the Revenue were dismissed, and the deletion of the penalty by CIT(A) was upheld, as the assessee's claim was based on a bona fide belief and all particulars of income were correctly disclosed.