2017 (2) TMI 163 - AT - Income Tax

Penalty under section 271(1)(c) - assessee was a sick company and under a scheme of revival by the BIFR, the management and shareholding pattern changed hands following which old directors resigned and new directors were inducted on the board of directors of the assessee - additions made by the AO on the basis of audited annual accounts filed by the assessee with the return of income by disallowing all the expenses charged to the profit and loss account - Held that - After dismissal of quantum appeal by the FAA, the AO mechanically levied penalty without recording any findings that as to how the assessee has concealed the income or filed in accurate particulars of income. Mere making a claim of expenses in the profit and loss account in a case where the accounts of the assessee were audited and also accounts were prepared under professional guidance and advice would not automatically lead to inference that assessee is liable to the penal action u.s 271(1)(c) of the Act. A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Therefore, in our opinion the ld.CIT(A) has rightly deleted the penalty imposed by the AO after taking into account the contentions put forth by the assessee vis-a-vis the provisions of the Act by relying on the ratio in the decision of the Reliance Petroproducts Pvt Ltd (2010 (3) TMI 80 - SUPREME COURT ) - Decided in favour of assessee.

Summary

Issues:
Deletion of penalty under section 271(1)(c) of the Act by CIT(A) based on the appeal filed by the revenue against the order passed for assessment year 2007-08.

Analysis:
The appeal filed by the revenue contested the deletion of a penalty amount by the CIT(A) under section 271(1)(c) of the Act. The facts revealed that the assessee, a sick industrial undertaking, faced challenges in producing records before the Assessing Officer (AO) due to uncooperative old management. The AO concluded that the assessee discontinued manufacturing since 2004, resulting in various disallowances and additions to the income. The AO initiated penalty proceedings for inaccurate particulars and concealment of income. The CIT(A) deleted the penalty, emphasizing that penalty proceedings are distinct and require specific evidence of concealment, which was lacking in this case. The CIT(A) noted that the AO did not establish inaccurate particulars of income. The appellate authority highlighted that making debatable claims does not automatically warrant a penalty, citing the decision in Reliance Petroproducts Pvt. Ltd. v. CIT. Consequently, the penalty under section 271(1)(c) was deleted.

The revenue, represented by the ld. DR, argued that the penalty was justified as the AO's assessment order was confirmed by the First Appellate Authority (FAA). However, the ld. AR for the assessee contended that all expenses and income were disclosed in the annual accounts filed with the return, and not challenging the FAA's order did not imply concealment. The Tribunal observed that the AO made additions based on audited accounts, and the penalty was imposed mechanically without proving concealment. The Tribunal agreed with the CIT(A)'s decision, considering the reliance on the Supreme Court's ruling in Reliance Petroproducts Pvt. Ltd. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the penalty under section 271(1)(c) based on the lack of evidence for concealment and inaccurate particulars of income, as per the provisions and precedents cited in the case.