2017 (9) TMI 724 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80IB was claimed on the basis of an audit report signed by a Chartered Accountant - Held that - Additions were made by the ld. AO, it is evident that on all grounds on which penalty was levied, there is no dispute that the assessee had not suppressed any facts and the claim has been made on the basis of audited accounts and on the basis of audit report, duly signed by the CA. Hence penalty on the ground of concealment of particulars of income could not have been levied. Disallowance of claim of Additional depreciation allowance under Section 32(1)(iia) - higher amount of depreciation allowance in the subsequent years - higher WDV - Held that - We find that there is no dispute about the fact that assessee had acquired certain plant and machinery which was owned by the assessee and was also put to use during the current year. The assessee is, therefore eligible to claim depreciation thereon under Section 32. However, the assessee had interpreted the term installed capacity to mean total installed capacity of all units taken together whereas the AO has taken the installed capacity to mean installed capacity of the eligible units only. The impact of this action of the AO is that the appellant will be entitled for higher WDV on this amount and shall be able to claim higher amount of depreciation allowance in the subsequent years. Thus, in view of the above, it is evident that in view of debatable nature of the issue, it cannot be held that inaccurate particulars were filed by the appellant, since the claim of the appellant regarding depreciation allowance was on a different interpretation of the term installed capacity as compared to the view taken by the Ld. AO. It is evident that such a view could be debatable and hence in the absence of any inaccuracy in the claim of the appellant, it cannot be held that the appellant had filed inaccurate particulars of income on this issue. Reduction of the amount of deduction under Section 80IB by exclusion of interest income from the computation of eligible profit - Held that - On careful consideration, as the interest income from deposits made with suppliers and interest from the customers on delayed payment, is derived from the business of the appellant, it cannot be said with certainty that the same had to be taxed under Income from Other Sources . Accordingly, no penalty can be levied on the same. However, since assessee had admitted to treat interest from bank deposits as Income from Other Sources , the amount of penalty is restricted to the addition in respect of interest on deposit in bank of ₹ 30,824 only. Disallowance of donation - Held that - As find that the use of nomenclature donation is the root cause of this dispute. This amount comprises of payment of ₹ 16,857 to a widow of an employee of the appellant company, which was incurred for the purpose of maintaining harmonious relationship with the staff and it is more in the nature of staff welfare than donation . Regarding the balance amount of of ₹ 6,000, paid to Helpage (India), no receipt was furnished before me. Further, no receipt in respect of other donations of ₹ 2,5OO was filed. In view of the same, the inaccuracy in filing particulars of income was established to the extent of ₹ 8,5OO on this ground. Levy of penalty was rightly confirmed to the extent of inaccurate particulars of income filed by the assessee in respect of income amounting to ₹ 39,324 only by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the order of the Ldc. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue. Appeal of the Revenue is dismissed.

Summary

Issues:
Penalty imposition under Section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
The case involved an appeal by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the imposition of a penalty for furnishing inaccurate particulars of income. The additions made in the assessment order were challenged, leading to a penalty being levied under Section 271(1)(c) of the Income Tax Act, 1961. The AO relied on various judgments to justify the penalty, including decisions by the Supreme Court and the Delhi High Court. The assessee contested the penalty, stating that the deductions were based on audit reports signed by a Chartered Accountant. The Ld. First Appellate Authority partially allowed the appeal of the assessee.

The Tribunal analyzed the legal provisions under Section 271(1)(c) and the burden of proof placed on the assessee to show no intention of concealment. Various judgments were cited to highlight the requirement of deliberation on the part of the assessee for penalty imposition. The Tribunal discussed the role of the Explanation to Section 271(1)(c) and how it has been interpreted differently by different High Courts, leading to conflicting decisions. Landmark judgments by the Supreme Court were referenced to establish rules for imposing penalties, emphasizing the need for the Assessing Officer to establish concealment of income.

The Tribunal further discussed recent Supreme Court decisions, including the relevance of Mens rea in penalty imposition and the conditions necessary for the application of Section 271(1)(c). The judgment in the case of Reliance Petro Products Pvt. Ltd. clarified the legislative intent behind imposing penalties under this section. The Tribunal examined each ground on which additions were made and concluded that there was no suppression of facts by the assessee. The Tribunal also analyzed the specific issues of additional depreciation, deduction under Section 80IB, and disallowance of donations to determine the accuracy of the particulars filed by the assessee.

Ultimately, the Tribunal upheld the order of the Ld. Commissioner of Income Tax (Appeals) regarding the penalty imposition, restricting it to the extent of inaccurate particulars of income filed by the assessee. The Tribunal dismissed the appeal of the Revenue, emphasizing the need to consider the facts and circumstances of each case before applying penalty provisions under Section 271(1)(c).

In conclusion, the judgment provides a detailed analysis of the legal provisions, judicial precedents, and factual considerations involved in imposing penalties for furnishing inaccurate particulars of income under Section 271(1)(c) of the Income Tax Act, 1961.