2016 (12) TMI 741 - AT - Income Tax

Penalty under section 271(1)(c) - disallowance of prior period expenditure - Held that - Hon ble Punjab and Haryana High Court in the case of CIT, Ludhiana vs. East Man International (2012 (10) TMI 249 - PUNJAB AND HARYANA, HIGH COURT) observed that mere making of claim for deduction of prior period expenses which was ultimately found to be unsustainable would not by itself be inaccurate particulars of income as to pass penalty order under section 271(1)(c) of the Act. As assessee is a government undertaking and no personal interest was involved for furnishing of inaccurate particulars of income or concealment of income. In our view, it is not a case of furnishing of inaccurate particulars of income or of concealment of income. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) while deleting the impugned penalty. - Decided in favour of assessee

Summary

Issues:
Revenue's appeal against deletion of penalty under section 271(1)(c) of the Act by CIT(A).

Analysis:
The Revenue appealed against the CIT(A)'s decision to delete the penalty of ?1688994/- imposed by the AO under section 271(1)(c) of the Act. The penalty was related to the disallowance of prior period expenditure claimed by the assessee. The AO disallowed the prior period expenses without adjusting the prior period income, leading to the penalty imposition. The assessee, a government undertaking, argued before the CIT(A) that it had fully disclosed all material facts, including the prior period income, and there was no intention to conceal income. The CIT(A) noted that the AO had disallowed the expenditure but all details were in the return of income. The CIT(A) emphasized that assessment and penalty proceedings were distinct, citing a High Court decision that claiming unsustainable deductions did not constitute inaccurate particulars of income for penalty under section 271(1)(c) of the Act.

The ITAT, after considering both parties' arguments, observed that the AO had dropped penalty proceedings for the subsequent assessment year 2011-12, indicating inconsistency in penalty imposition. The ITAT highlighted that the assessee being a government undertaking had no personal interest in furnishing inaccurate particulars or concealing income. The ITAT concluded that there was no evidence of inaccurate particulars or income concealment, affirming the CIT(A)'s decision to delete the penalty. The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order.

In summary, the ITAT upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Act, emphasizing the lack of evidence for inaccurate particulars or income concealment by the government undertaking assessee. The ITAT noted the inconsistency in penalty imposition by the AO for different assessment years and concluded that the penalty was unjustified in this case, resulting in the dismissal of the Revenue's appeal.