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2017 (12) TMI 518 - AT - Income TaxPenalty u/s. 271(1)(c) - proof of mens rea or guilty mind - claim of provision u/s 36(1)(viia) - Held that - In view of the order passed by the ITAT in the assessee s own case, we are of the view that the penalty is not leviable. Moreover, it is not a case of furnishing the inaccurate particulars of income and concealment of particulars of income because we also noticed that the case of the assessee is in connection with the raising of the claim in view of the provision u/s 36(1)(viia) of the Act which has been declined therefore, no penalty is leviable in view of the law settled in CIT Vs. Reliance Petro Product 2010 (3) TMI 80 - SUPREME COURT in view of the above discussion it is quite clear that the no penalty is liable therefore, we set aside the finding of the CIT(A) on this issue and delete the penalty. - Decided in favour of assesee.
Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act. 2. Mens rea or guilty mind in the context of concealment under Section 271(1)(c). 3. Excess claim for bad and doubtful debts under Section 36(1)(viia). 4. Validity of penalty notice under Section 274 r.w.s. 271(1)(c). 5. Applicability of legal precedents, including CIT vs. Reliance Petro Products and CIT vs. Manjunath Cotton and Ginning Factory. Detailed Analysis: 1. Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act: The assessee appealed against the CIT(A) order confirming the penalty levied by the AO under Section 271(1)(c) for the assessment year 2009-10. The penalty was imposed due to an excess claim of deduction for bad and doubtful debts, which was restricted by the AO. 2. Mens Rea or Guilty Mind in the Context of Concealment under Section 271(1)(c): The assessee argued that there was no mens rea or guilty mind, which is essential for the expression "concealment" as envisaged in Section 271(1)(c). The claim for bad and doubtful debts was made based on available data and information from the bank's branches, and there was no intention to conceal income or furnish incorrect particulars. 3. Excess Claim for Bad and Doubtful Debts under Section 36(1)(viia): The assessee claimed a deduction of ?3,77,18,617 (7.5% of total income) and ?27,72,40,100 (10% of aggregate advances by rural branches). The AO found the claim to be excessive by ?25,49,58,717 and restricted the deduction to ?6,00,00,000. The penalty of ?7,92,59,259 was confirmed by the CIT(A), leading to the present appeal. 4. Validity of Penalty Notice under Section 274 r.w.s. 271(1)(c): The assessee contended that the penalty notice did not specify the particular limb (concealment of income or furnishing inaccurate particulars) under which the penalty was levied. This lack of specification rendered the penalty unsustainable, citing CIT vs. Manjunath Cotton and Ginning Factory and CIT vs. Samsung Perinchary. 5. Applicability of Legal Precedents: The assessee referenced several legal precedents, including CIT vs. Reliance Petro Products, where it was held that merely making a claim that is not sustainable does not amount to furnishing inaccurate particulars. The ITAT in the assessee's own case for A.Y. 2008-09 had deleted the penalty under similar circumstances. Conclusion: The ITAT found that the penalty notice did not specify the charge, reflecting non-application of mind by the AO. This was in line with the Supreme Court's decision in Dilip N. Shroff and the jurisdictional High Court's decision in CIT vs. Samson Perinchary. The penalty was deemed unsustainable due to this procedural defect. Furthermore, the excess claim for bad and doubtful debts, based on available data, did not amount to concealment or furnishing inaccurate particulars. Consequently, the ITAT set aside the CIT(A)'s order and deleted the penalty. Order: The appeal of the assessee was allowed, and the penalty was deleted. The order was pronounced in the open court on 15th November 2017.
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