2016 (12) TMI 359 - HC - Income Tax

Penalty u/s. 271(1)(c) - Held that - None of the authorities have held that the Applicant-Assessee had not furnished all details of expenditure as well as income in its return with the necessary details. Merely because the Applicant-Assessee s a claim, was disallowed in the earlier Assessment Year would not by itself debar it from making a claim in a subsequent Assessment Year. There is no estoppel against law. The aforesaid fact coupled with the fact that the Assessing Officer while passing an Assessment Order, appears to have been satisfied with the claim that deferred revenue expenditure was a bonafide claim after necessary disclosure. This is self evident as he did not initiate any penalty proceedings under Section 271 (1)(c) of the Act. It is a settled position in law as held by the Apex Court in CIT v/s. Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT where all details of expenses and income had been furnished in its return, mere disallowing a claim of expenditure would not by itself lead to the conclusion that there has been concealment of income and/or filing of inaccurate particulars, warranting penalty under Section 271 (1)(c) of the Act. - Decided in favour of assessee

Summary

Issues:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Competency of the Commissioner of Income Tax (Appeals) to initiate penalty proceedings under Section 271(1)(c) without fresh facts.

Analysis:
1. The Applicant-Assessee declared income as 'Nil' for Assessment Year 1989-90 but claimed an expenditure of ?6.48 lakhs as deferred revenue expenditure. The Assessing Officer disallowed this expenditure, adding it to the income chargeable to tax without initiating penalty proceedings under Section 271(1)(c) of the Act.
2. The Commissioner of Income Tax (Appeals) dismissed the Applicant-Assessee's appeal on merits and initiated penalty proceedings under Section 271(1)(c) regarding the claimed deduction. A penalty of ?3.40 lakhs was imposed on the grounds of filing false claims for deduction with incorrect income particulars.
3. The Tribunal upheld the penalty, stating that the Applicant-Assessee filed incorrect income particulars as the claim in the subject year had been disallowed previously. The Tribunal found the claim not bona fide, leading to the penalty imposition.
4. However, it was noted that the Assessing Officer did not find justification to initiate penalty proceedings during the assessment but the CIT(A) initiated and imposed the penalty. The Tribunal upheld this decision based on the claim disallowance in earlier years.
5. The High Court referred to the principle established in CIT v/s. Reliance Petroproducts, stating that mere disallowance of an expenditure claim does not automatically lead to concealment of income or inaccurate particulars, warranting a penalty under Section 271(1)(c) of the Act.
6. Ultimately, the High Court answered the substantial question of law in favor of the Applicant-Assessee, holding that the penalty imposition was not justified, and disposed of the reference accordingly without costs.