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2018 (3) TMI 215 - AT - Income TaxPenalty u/s 271(1)(c) - assessee claimed the foreign exchange fluctuation amount on account of an inadvertent error - no clear specification of charge - Held that - The assessee s intention was not to conceal the income. The assessee had rightly disclosed it in the Profit and Loss account and not included while computing the taxable income. The revised return of income filed by the assessee has also been accepted by the AO. In view of the judgment in the case of CIT vs. Reliance Petro products P. Ltd. (2010 (3) TMI 80 - SUPREME COURT) we are of the view that it is not a fit case for levy of penalty as AO had not given any finding separately as to whether there was concealment of income or whether assessee had furnished inaccurate particulars of income. The AO has imposed the penalty on the ground of disallowance of foreign exchange fluctuation. The assessee cannot be fastened with the law of penalty without there being a clear specific charge. Fixing a charge should not be in a casual manner and it has not been permitted under the law. - Decided in favour of assessee
Issues Involved:
1. Deletion of penalty under Section 271(1)(c) of the Income-tax Act, 1961. 2. Consideration of Explanation 1 to Section 271(1)(c). 3. Justification of the assessee's claim and its bona fide nature. 4. Applicability of the Delhi High Court's decision in CIT vs. Zoom Communications P. Ltd. Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c): The Revenue appealed against the CIT(A)'s order, which deleted the penalty of ?4,40,47,933/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income-tax Act, 1961. The AO had levied the penalty on the grounds that the assessee had concealed income and furnished inaccurate particulars by claiming foreign exchange fluctuation loss. However, the CIT(A) canceled the penalty, stating that the AO failed to prove that the claim was made with malafide intention. 2. Consideration of Explanation 1 to Section 271(1)(c): The AO contended that the penalty should be upheld based on Explanation 1 to Section 271(1)(c), which applies when an assessee makes a claim that is incorrect in law and not bona fide. The AO cited several case laws, including Union of India v. Dharamendra Textile Processors and CIT vs. Zoom Communications P. Ltd., to support the imposition of penalty. However, the CIT(A) and the Tribunal found that the assessee's claim was made due to a bona fide mistake and not with the intention to conceal income or furnish inaccurate particulars. 3. Justification of the Assessee's Claim and Its Bona Fide Nature: The assessee, a public limited company, had claimed foreign exchange fluctuation loss as a revenue expenditure instead of adding it to the cost of plant and machinery, which would have been eligible for depreciation. The CIT(A) and the Tribunal accepted the assessee's explanation that the mistake was bona fide and inadvertent. The assessee had disclosed all relevant facts in its return of income, and there was no evidence of malafide intention. The Tribunal also noted that the assessee did not appeal against the disallowance, further indicating the bona fide nature of the claim. 4. Applicability of the Delhi High Court's Decision in CIT vs. Zoom Communications P. Ltd.: The AO relied on the Delhi High Court's decision in CIT vs. Zoom Communications P. Ltd., where the court held that a penalty is justified if the claim is not only incorrect in law but also wholly without basis and not bona fide. However, the Tribunal distinguished the present case from Zoom Communications, noting that the assessee's claim was based on a bona fide mistake and not made with malafide intention. The Tribunal emphasized that penalty under Section 271(1)(c) should not be imposed merely because a claim is incorrect in law; it must also be shown that the claim was made with malafide intention. Conclusion: The Tribunal upheld the CIT(A)'s order deleting the penalty under Section 271(1)(c), concluding that the assessee's claim was made due to a bona fide mistake and not with the intention to conceal income or furnish inaccurate particulars. The Tribunal emphasized that penalty provisions should not be applied in a casual manner and must be based on clear and specific charges. The appeal of the Revenue was dismissed.
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