2018 (7) TMI 2164 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of provision for excise duty payable amounting to ₹ 30,00,000/- by invocation of section 43B - HELD THAT - We find ourselves in agreement with the submission of the learned counsel of the assessee that all the necessary particulars were duly disclosed by the assessee - There is no case of concealment of income or furnishing of inaccurate particulars of income. In this regard, the case laws relied upon by the Commissioner of Income Tax (Appeal) and as canvassed by the learned counsel of the assessee are germane and support the case of the assessee. As held in the case of Reliance Petroproducts Pvt. Ltd.. 2010 (3) TMI 80 - SUPREME COURT , the disallowance of a claim made by the assessee cannot itself give rise to levy of penalty under section 271(1)(c) of the Act. Accordingly, in the background of aforesaid discussion and precedent we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly, we uphold the same. Appeal filed by the Revenue stands dismissed

Summary

Issues:
Levy of penalty under section 271(1)(c) for disallowance of provision for excise duty payable.

Analysis:
The appeal pertains to the deletion of penalty u/s. 271(1)(c) of the Act amounting to ?10,97,775/- by the ld. Commissioner of Income Tax (Appeals). The case involved the disallowance of provision for excise liability expenses amounting to ?30,00,000/- in the assessment year 2005-06. The Assessing Officer disallowed the provision for excise liability, citing section 43B that allows expenses only on actual payment. The Assessing Officer levied the penalty under section 271(1)(c) for alleged concealment of income. The ld. Commissioner of Income Tax (Appeals) deleted the penalty, emphasizing that the disallowance under section 43B is a legal issue, and no penalty is leviable on legal matters. The ld. Commissioner relied on the decision in the case of Reliance Petroproducts Pvt. Ltd. where it was held that a claim not sustainable in law does not amount to furnishing inaccurate particulars. The ld. Commissioner also cited the case of CIT vs. Varun Finstock Pvt. Ltd. to support the decision. It was clarified that the penalty order is independent of the assessment order, and the mere confirmation of addition does not automatically warrant a penalty.

Upon hearing both parties, the ITAT upheld the decision of the ld. Commissioner of Income Tax (Appeals). The ITAT concurred that the necessary particulars were disclosed by the assessee, and there was no concealment of income or furnishing of inaccurate particulars. The ITAT referenced the case law of Reliance Petroproducts Pvt. Ltd. to emphasize that the disallowance of a claim does not justify the imposition of a penalty under section 271(1)(c). Therefore, the ITAT found no fault in the decision of the ld. Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal.