2016 (11) TMI 454 - AT - Income Tax

Confirmation of penalty u/s. 271(1)(c) - additions pertaining to sale of PCBs and closing stock in finished goods - Held that - It is the action of AO in bringing into tax, sale recorded in next year as sale of this year on the reason that goods were shown as discharged in the RG1 Register. In fact, there is no concealment as such. It is only the question of year of taxability. With reference to three Shock Pulse Analysers valued at ₹ 3,10,802/- again it is the RG1 Register which is the basis for AO s action and assessee s contentions that this stock was part of work-in-progress has not been disproved. It may be that it does not have much tax effect in assessee s case, therefore, assessee has not pursued the litigation, but as the facts indicate assessee s contentions that the same value was shown in work-in-progress and the addition is a double addition have not been invalidated. Considering these, we are of the opinion that these two amounts certainly does not fall in the category of concealment of income and therefore, penalty cannot be levied on the above two amounts. - Decided in favour of assessee Disallowance of 80-IA - Held that - Assessee has acquired the property earlier in 01-04-1992 and the EMC Electronik unit was set up in AY. 1992-93. It was submitted that it has complied with all the conditions of Section 80-IA. This being the third year of the claim, AO analysed that assessee purchased second hand machinery and disallowed the claim. It is to be noted that claim u/s 80-IA was allowed by the Ld.CIT(A) after due examination by him. On further appeal by Revenue, ITAT however, has not allowed the claim. This shows that it is mere rejection of a claim. Mere disallowance of a claim does not come within the purview of concealment of income . It can also do not form under the category of furnishing of inaccurate particulars . See COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - Decided in favour of assessee

Summary

Issues involved: Appeal against the confirmation of penalty u/s. 271(1)(c) of the Income Tax Act by the Commissioner of Income Tax (Appeals), Hyderabad.

Analysis:
1. Disallowance of claim u/s. 80-IA and certain additions: The assessee, a private limited company, contested the disallowance of the claim u/s. 80-IA and certain additions made by the Assessing Officer. The CIT(A) allowed the deduction u/s. 80-IA, which was later reversed by the ITAT. The penalty u/s. 271(1)(c) was initiated based on these disallowances. The assessee argued that the disallowance of the claim does not warrant a penalty, as the additions were from the assessee's own records and had been accounted for. However, the CIT(A) confirmed the penalty, rejecting the limitation issue raised by the assessee.

2. Grounds raised by the assessee: The assessee raised multiple grounds challenging the order of the Commissioner of Income Tax (Appeals). These grounds included contentions regarding the levy of penalty, disallowance of deduction u/s. 80-IA, and the treatment of closing stock of finished goods. The assessee argued that the penalty was unjustified, especially concerning the disallowance of the deduction u/s. 80-IA, which was allowed by the CIT(A) but reversed by the ITAT.

3. Assessee's submissions and arguments: The counsel for the assessee presented arguments regarding the additions made by the Assessing Officer, including the treatment of certain amounts and the disallowance of the deduction u/s. 80-IA. The counsel highlighted that the disallowance of the claim does not automatically lead to a penalty, citing previous judicial decisions and principles laid down by the Hon'ble Supreme Court.

4. ITAT's decision and rationale: After considering the rival contentions and examining the facts on record, the ITAT concluded that the penalty u/s. 271(1)(c) was not justified in this case. The ITAT found that the additions made by the AO were based on the RG1 Register entries and the assessee's explanations regarding the treatment of certain items in the closing stock were plausible. The ITAT also emphasized that the mere disallowance of a claim, as in the case of deduction u/s. 80-IA, does not amount to concealment of income or furnishing inaccurate particulars. Citing relevant case laws, the ITAT ruled in favor of the assessee, canceling the penalty and allowing the appeal.

In conclusion, the ITAT held that the penalty u/s. 271(1)(c) was unwarranted in this case as the additions made by the AO were based on the RG1 Register entries, and the disallowance of the deduction u/s. 80-IA did not constitute concealment of income or furnishing inaccurate particulars. The ITAT's decision was in line with previous judicial interpretations and principles laid down by higher courts, leading to the cancellation of the penalty and allowing the appeal of the assessee.