2018 (3) TMI 1867 - AT - Income Tax

Penalty u/s 271(1)(c) - AO held that the assessee is eligible for deduction u/s 80IC only @ 25% as against the claim of 100% made by the assessee - HELD THAT - Assessee claimed deduction section 80IC in assessment year under appeal in a bonafide manner and mere fact that claim of assessee has been disallowed, would not prove it to be a fit case of levy of penalty for filing inaccurate particulars of income. The issue of claim of deduction was debatable and bonafide. There was conflict for determination of provision of law. Merely making a claim of 100% deduction against 25% as per opinion of the Assessing Officer under section 801C of the Act would not be at par with concealment of income or furnishing inaccurate particulars of income. The decisions relied upon by Id. counsel for the assessee support the contention of Id. counsel for the assessee that it is not a fit case of levy of penalty under section 271(1)(c) . A mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding tlie income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - See Reliance Petroproducts Ltd. 2010 (3) TMI 80 - SUPREME COURT . Since the assessee's claim of deduction under section 80IC have been allowed in earlier years @ 100% and admittedly assessee undertook substantial expansion in assessment year under appeal therefore, assessee made bonafide claim of deduction under section 80IC of the Act and there were no judicial pronouncements against the assesses on the date of making such a claim. Therefore, it could not be construed that the assessee has furnished inaccurate particulars of income so as to levy the penalty under section 271(1)(c) - Decided in favour of assessee. Levy of penalty on the claim of deduction u/s 80IC w.r.t. carrying out substantial expansion in the 8th year is directed to be deleted. Penalty on interest incurred under section 14A - HELD THAT - The appellant has claimed that the dividend received has not been included in the income eligible for deduction u/s 80IC and the same has been claimed exempt under the I.T. Act, 1961. The perusal of the computation sheet shows that the submissions of the appellant are correct with regards to reducing the dividend income from business income and claiming it exempt separately .Hence the A.O. is accordingly is directed to delete the penalty levied on this ground. Penalty on foreign exchange fluctuation - Disallowance of deduction u/s 80IC on foreign exchange fluctuation - HELD THAT - ITAT in assessee's own case has referred the matter back to the file of the A.O. in assessment year 2010-11. The ITAT has allowed the deduction u/s 80IC on foreign exchange fluctuation in case it is relatable to business receipts of revenue nature. The assessing officer in A.Y. 2010-11 has not levied penalty on this issue. Considering these facts, the A.O. is accordingly is directed to delete the penalty levied on the addition made on account of the foreign exchange fluctuation. It is hereby held that the penalty cannot be levied on the claim of wrong deduction under section 80IC, claim of currency fluctuation, on disallowance of interest under section 14A, and claim of deduction on the interest received on margin money and misc. receipts as these do not constitute concealment of furnishing of inaccurate particulars of income with reference to the levy of penalty under section 271(1)(c). Decided in favour of assessee.

Issues Involved:
1. Penalty under section 271(1)(c) for wrongful claim of deduction under section 80IC.
2. Penalty for deduction on interest received on margin money.
3. Penalty for disallowance of expenses under section 14A.
4. Penalty for deduction on foreign exchange fluctuation.

Detailed Analysis:

1. Penalty under section 271(1)(c) for wrongful claim of deduction under section 80IC:

The assessee claimed 100% deduction under section 80IC for the eighth year, asserting substantial expansion in the assessment year 2009-10. The assessing officer restricted the claim to 25%, initiating penalty proceedings for wrongful deduction claims. The assessee argued that the claim was bona fide and supported by the audit report and past history. The Tribunal referenced the ITAT Chandigarh's decision in the assessee's own case for AY 2009-10, where it was held that the claim was not false or wrong and was based on substantial expansion. It was a debatable issue, and mere disallowance did not amount to furnishing inaccurate particulars. The Tribunal concluded that the penalty under section 271(1)(c) was not justified and directed its deletion.

2. Penalty for deduction on interest received on margin money:

The assessing officer disallowed the deduction under section 80IC on interest received on margin money, relying on Supreme Court judgments in Pandian Chemicals Ltd. and Liberty India Limited. The assessee contended that the interest earned from FDRs made out of business compulsion was eligible for deduction under section 80IB, citing Delhi High Court judgments in Pr. CIT Vs. Universal Precision Screws and Riviera Home Furnishing Vs. Addl. CIT. The Tribunal agreed with the assessee and directed the deletion of the penalty levied on this ground.

3. Penalty for disallowance of expenses under section 14A:

The assessee claimed that the dividend income of ?10,50,047 was not included in the income eligible for deduction under section 80IC and was claimed exempt separately. The computation sheet confirmed the assessee's claim. The Tribunal referenced the ITAT Chandigarh's decision in the case of Aarge Drugs P Ltd., which held that penalty under section 271(1)(c) was not leviable for disallowance under section 14A. The Tribunal directed the deletion of the penalty levied on this ground.

4. Penalty for deduction on foreign exchange fluctuation:

The assessee argued that the foreign exchange fluctuation was related to business receipts of revenue nature. The ITAT in the assessee's own case for AY 2010-11 had referred the matter back to the assessing officer, who did not levy a penalty on this issue. The Tribunal directed the deletion of the penalty levied on the addition made on account of foreign exchange fluctuation, considering the consistency principle and previous ITAT decisions.

Conclusion:

The Tribunal held that the penalties under section 271(1)(c) for the wrongful claim of deduction under section 80IC, disallowance of interest under section 14A, and deduction on interest received on margin money and foreign exchange fluctuation were not justified. These claims did not constitute concealment or furnishing inaccurate particulars of income. Consequently, the appeal of the Revenue was dismissed, and the appeal of the assessee was allowed.

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