2017 (4) TMI 1509 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition on account of write back of bad debts, writing back of investments, deduction u/s 10(23) disallowance of depreciation on lease transactions treated as finance transactions, expenses for earning dividend u/s 80M, expenses apportioned for earning dividend income, share issue expenses and disallowance of deduction u/s 36(1)(viii) - HELD THAT - CIT(A) has passed very reasoned and detailed order giving detailed explanations and justifications for deleting the penalty imposed by the AO on various disallowances, the details whereof has been given hereinabove. We find that under Rule 8D of the Rules, the disallowance was made by following the decision of Hon ble Jurisdictional High Court and most of the issues are therefore are covered by the assessee s own case and we also find that all the facts have been fully disclosed in the return of income and in the assessment proceedings and therefore do not attract any penal action u/s 271(1)(c ) specifically linking with the disallowance under rule 8D, the same was made by following the decision of Jurisdictional High Court which was not available at the time of filing of the return. The rest of the expenses were claimed by following the decisions in assessee s own cases for the assessment year 1987-88 which ultimately has been followed by the ld.CIT(A). Disallowance of deduction u/s 36(1)(viii) and the issue with regard to deduction u/s 10(23G) - Section 14A was introduced by the Finance Act, 2001whereas the return of income was filed before 29.11.1997. On the issue of depreciation on lease asset, the same was deleted by the Co-ordinate Bench of the Tribunal in the earlier year in assessee s own case and hence no order of ld.CIT(A) on this issue is correct. On disallowance u/s 80M, the expenses apportioned to earning the dividend income and mentioned in the return of income and thus the penalty was rightly deleted by the FAA. Disallowance and deduction u/s 36(1)(viii), the deduction was verifiable as linked with the business profit of the assessee and the CIT(A) was also justified in deleting the same. With regard to writing of bad debts, the investment were not claimed in the return of income and claimed in the assessment proceedings and therefore do not constitute in filing inaccurate particulars of income or concealment of income. DR except reiterating the contentions as raised before the ld. CIT(A) neither brought any material to prove contrary to the findings of the ld.CIT(A) nor produced any case law so as to compel us to take a different view than the view so taken by the CIT(A). No infirmity in the order of ld.CIT(A). Accordingly, we confirm the action of the ld.CIT(A) and dismiss the appeal of the Revenue.

Summary

Issues Involved:
Appeal against deletion of penalty u/s 271(1)(c) for various disallowances made in the assessment.

Analysis:
1. The appeal was against the deletion of penalty u/s 271(1)(c) for various disallowances made in the assessment for the year 1997-98. The revenue contended that the ld.CIT(A) erred in deleting the penalty levied on different grounds, including write back of bad debts, investments, deduction u/s 10(23), depreciation on lease transactions, expenses for earning dividend u/s 80M, and other disallowances.

2. The ld.CIT(A) justified the deletion of penalty on multiple grounds. For example, on the disallowance under Rule 6D, the penalty was deleted as the assessee revised its claim during assessment proceedings. Similarly, penalties were deleted for various other disallowances based on legal precedents, previous tribunal decisions, and proper disclosure of income and expenses during assessment.

3. The ld.CIT(A) deleted penalties for disallowances like bad debts, investments, deduction u/s 10(23), depreciation on lease transactions, expenses for earning dividend income, share issue expenses, and deduction u/s 36(1)(viii). The decisions were based on legal reasoning, proper disclosure, and following previous tribunal rulings or High Court decisions.

4. The ld.DR argued for restoring the penalties imposed by the AO, but the ld.AR supported the CIT(A)'s reasoned order justifying the penalty deletions. The ITAT upheld the CIT(A)'s decision, noting that all facts were disclosed, and penalties were not warranted under section 271(1)(c) due to proper disclosure and legal compliance in the assessment proceedings.

5. The ITAT found no infirmity in the CIT(A)'s order and confirmed the penalty deletions, dismissing the revenue's appeal. The decision was based on detailed analysis, legal precedents, and proper disclosure of income and expenses during assessment proceedings.

6. In conclusion, the ITAT upheld the CIT(A)'s decision to delete penalties for various disallowances, emphasizing proper disclosure, legal compliance, and following previous legal rulings and decisions. The appeal of the revenue was dismissed, and the CIT(A)'s order was confirmed.