2017 (11) TMI 378 - AT - Income Tax

Penalty u/s 271 (1)(C) - transfer of general reserve and claim of higher depreciation - assessee society is registered U/s 12AA - Held that - The claim of depreciation at higher rate was based on bonafide belief that the buses for transportation of students will be eligible for higher rate of depreciation. The assessee has made full disclosure of particulars before the Assessing Officer, therefore, in our considered view, this amount cannot be treated as concealed particulars of income. Further the amount of ₹ 55,83,342/- was transferred to general reserve, on this amount also, the assessee has not furnished inaccurate particulars of income. In this factual matrix, we also note that there was no tax implication arising out of the assessment passed by the Assessing Officer for the reason that such additions got set off with the brought forward losses. Considering all these facts and circumstances, we sustain the order of the ld. CIT(A) on this issue. For he amount transferred to general reserve for which we have already taken a view that the assessee has made the claim in the return of income and has submitted all relevant documents. Further it was a debatable issue, therefore, in this year also, we sustain the order of the ld. CIT(A). The other issue for levy penalty of ₹ 9,45,825/- was that income over expenditure. The issue was debatable and it was simply a difference of opinion between A.O. and assessee society. The assessee had neither concealed income nor filed inaccurate particulars of income. On this issue also, we agree with the findings of the ld. CIT(A) that this was a debatable issue and there was different opinion on such issue. Considering all these facts, we find no fault in the order of the ld. CIT(A) and accordingly, we sustain the same. - Decided against revenue

Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Treatment of revenue receipts as capital receipts.
3. Reliance on decisions with different facts.
4. Imposition of penalty for concealment or inaccurate particulars of income.

Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in the revenue’s appeals (ITA No. 1029/JP/2016 and ITA No. 1030/JP/2016) was whether the CIT(A) was correct in deleting the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The CIT(A) had deleted the penalty on the grounds that the assessee society, registered under Section 12AA of the Act, had applied its income for charitable purposes as defined under Section 2(15) of the Act. The AO had imposed penalties on two counts: transfer of general reserve and excess depreciation claims. The CIT(A) found that the higher depreciation claim was based on a bona fide belief and thus did not constitute concealment or inaccurate particulars of income. Similarly, the transfer to the general reserve was found to be a debatable issue and not a deliberate concealment of income.

2. Treatment of Revenue Receipts as Capital Receipts:
The revenue contended that the CIT(A) erred in holding that revenue receipts taken directly to the general reserve fund as capital receipts did not amount to furnishing inaccurate particulars of income. The CIT(A) noted that the assessee had made full disclosure of particulars before the AO, and thus, the amounts could not be considered concealed income or inaccurate particulars. The ITAT upheld this view, stating that the assessee’s actions were based on a bona fide belief and were debatable issues, not warranting penalties under Section 271(1)(c).

3. Reliance on Decisions with Different Facts:
The revenue argued that the CIT(A) relied on decisions with different facts where revised returns were filed during assessment proceedings. The CIT(A) and the ITAT both found that the assessee’s case involved full disclosure of particulars and bona fide claims, distinguishing it from cases where revised returns indicated an attempt to rectify errors or omissions.

4. Imposition of Penalty for Concealment or Inaccurate Particulars of Income:
The AO had imposed penalties for amounts related to transfer to general reserves and excess depreciation claims, alleging concealment and furnishing inaccurate particulars of income. The CIT(A) and the ITAT found that the assessee had made full disclosures and the issues were debatable, thus not constituting concealment or inaccurate particulars. The ITAT cited the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd., emphasizing that mere disallowance of claims does not automatically lead to penalties for concealment or inaccurate particulars.

Conclusion:
The ITAT upheld the CIT(A)’s orders deleting the penalties imposed under Section 271(1)(c) for the assessment years 2011-12 and 2012-13. The appeals by the revenue were dismissed, and the assessee’s appeal was allowed, reinforcing the principle that penalties under Section 271(1)(c) require clear evidence of concealment or furnishing inaccurate particulars of income, which was not established in this case.

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