2017 (3) TMI 810 - AT - Income Tax

Penalty u/s 271(1)(c) - payment under the head management service charges to shareholders treated it as capital expenditure - Held that - As per the decision of Reliance Petroproducts (P) Ltd. ( 2010 (3) TMI 80 - SUPREME COURT) we find that for penalty for concealment of income if the assessee has made a claim of expenditure which was not accepted or was not acceptable to revenue by disallow not attract the penalty u/s 271(1)(c) of the Act for imposing the penalty there has to be concealment of particulars of income of the assessee secondly assessee must for furnish inaccurate particulars of this income. It is admitted fact that no information given in the return of assessee was found to be incorrect or inaccurate. The statement given by the assessee was not found to be factually incorrect hence prima facie assessee could not be held guilty for furnishing inaccurate particulars. Therefore, in this case the claim of the assessee was partly allowed by the CIT(A) and Tribunal has submitted the finding of CIT(A). Therefore, we are of the view that CIT(A) has rightly justified in following the decision of Hon ble Supreme Court. Whenever there is a debatable issue the penalty cannot be levied. - Decided in favour of assessee.

Summary

Issues:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the Revenue against the order of CIT(A)-8, Mumbai regarding the deletion of a penalty of Rs. 23,56,462 under section 271(1)(c) of the Income Tax Act. The Assessing Officer treated an amount claimed by the Assessee for transfer of technical know-how and license as capital expenditure, leading to a penalty imposition. However, the CIT(A) allowed the appeal stating that the disallowance made was debatable, and hence, the penalty was deleted. The CIT(A) relied on various legal precedents, including the case of CIT vs. Reliance Petroproducts (P) Ltd., to support the decision to delete the penalty.

The Revenue argued that the expenditure in question was capital in nature and part of intangible assets, justifying the penalty imposed by the Assessing Officer. They contended that the Assessee had not made a bonafide claim for deduction, leading to inaccurate particulars of income being furnished. The Revenue cited the decision in the case of Reliance Petroproducts (P) Ltd. to support their argument.

On the other hand, the Assessee claimed that the expenditure was debatable and had been disclosed in the return of income. They argued that the penalty could not be levied on a debatable issue and cited the decision in the case of Commissioner of Income Tax vs. Yahoo India (P.) Ltd. to support their stance. The Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that the Assessee had disclosed all relevant facts in the return of income.

The Tribunal found that the claim made by the Assessee was partly allowed by the CIT(A), and no inaccurate particulars were furnished in the return of income. They also referred to other legal precedents, such as the case of Sesa Resource Ltd. vs. Assistant Commissioner of Income Tax, to support the decision to delete the penalty. Ultimately, the Tribunal dismissed the appeal of the Department, affirming the deletion of the penalty by the CIT(A).