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2016 (12) TMI 1292 - AT - Income TaxPenalty u/s 271(1)(c) - disallowance of deduction claimed for exploration expenditure incurred in the business of prospecting u/s.42(1) - Held that - Difference between the assessee and the Revenue is with regard to the scope of the expenditure envisaged in section 42(1) of the Act. The relevant discussion in the assessment order or even in the penalty order passed by Assessing Officer, does not reflect that the claim of the assessee was fanciful or was patently erroneous so as to suggest any concealment of income or furnishing in accurate particulars of income within the meaning of section 271(1)(c) of the Act. The mere claim made by the assessee which is found to be unsustainable by the Assessing Officer does not ipso-facto lead to a penalty under section 271(1)(c) of the Act as held by the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT ) . In our considered opinion in the present case the difference between the assessed and the reported income on the aforesaid aspect is based on varying perception of the scope of section 42(1) of the Act and it is not a case reflecting any concealment or furnishing of inaccurate particulars by the assessee within the meaning of section 271(1)(c) of the Act. - Decided in favour of assessee.
Issues:
1. Appeal against penalty imposed under section 271(1)(c) of the IT Act for assessment year 2008-09. 2. Disallowance under Section 42(1)(b) of the IT Act. Analysis: 1. The appeal was filed against the penalty imposed under section 271(1)(c) of the IT Act for the assessment year 2008-09. The appellant contended that the orders of the Assessing Officer and the Commissioner of Income Tax (Appeals) violated principles of equity, natural justice, and the provisions of the Income Tax Act. The appellant argued that there was no concealment of income or furnishing of inaccurate particulars regarding the disallowance under section 42(1)(b) of the Act. The appellant provided all necessary information during the assessment and appellate proceedings, including contracts and service orders evidencing the nature of activities and expenditure incurred. The appellant claimed that drilling expenditure was incurred in blocks that had commenced commercial production, which was not disputed by the authorities. The appellant also highlighted that the penalty is not automatic for every adjustment made in the assessment or appellate proceedings. The Tribunal set aside the matter to the Assessing Officer for fresh consideration following a previous judgment in the appellant's own case for the assessment year 2007-08. 2. The disallowance under Section 42(1)(b) of the IT Act was a key issue in the case. The Assessing Officer had imposed a penalty concerning the deduction claimed for exploration expenditure incurred in the business of prospecting. The appellant justified the deduction under section 42(1) of the Act based on the actual expenses incurred proportionately to the total oil/gas reserves estimated from the blocks. The Revenue argued that the claimed deduction was for depletion in producing property, which was disallowable. The Tribunal observed that the difference between the appellant and the Revenue was regarding the scope of expenditure under section 42(1) of the Act. The Tribunal held that the mere claim made by the appellant, even if found unsustainable, did not warrant a penalty under section 271(1)(c) of the Act. The Tribunal concluded that no penalty was leviable for the disallowance of expenditure claimed under section 42(1) of the IT Act for the assessment year 2008-09, following the precedent set in the appellant's own case for the preceding assessment year 2007-08. In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that no penalty was justified for the disallowance under Section 42(1)(b) of the IT Act for the assessment year 2008-09.
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