2018 (4) TMI 137 - HC - Income Tax

Penalty proceedings u/s 271(1)(c) - disallowance of interest claimed out of net profits - Held that - The issue being debatable as two views were possible regarding allowability of interest in cases where profit had been declared on presumptive basis penalty for concealment could not be levied. Hence penalty levied on addition of interest of 42, 22, 678 was cancelled. Penalty levied on disallowance of depreciation - Held that - CIT(A) has rightly held that it is not a case of furnishing of inaccurate particulars of income or concealment of income for the purpose of avoidance or evasion of tax. The assessee in this case has made bonafide claim. The disallowance on the above issues was made by the Assessing Officer on account of difference of opinion and not on account of detection of any concealment of income. No penalty to be levied . - Decided against revenue.

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act against penalty deletion by ITAT.
2. Disallowance of interest and depreciation leading to penalty under Section 271(1)(c) of the Act.
3. Bonafide claim by the assessee and absence of concealment of income.

Analysis:

Issue 1:
The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT) deleting penalties imposed under Section 271(1)(c) of the Act. The substantial questions of law raised by the appellant pertained to the deletion of penalties amounting to ?31,00,000/- for malafide claims of interest and depreciation made by the assessee without proper maintenance of books of account.

Issue 2:
The facts revealed that the assessment for the year 2008-09 was completed with certain additions due to disallowance of interest, short-term capital loss, and higher depreciation claims. The penalties were initiated under Section 271(1)(c) for furnishing inaccurate particulars of income. The Commissioner of Income Tax Appeals (CIT(A)) and the Tribunal both concluded that the assessee had made bonafide claims, and the disallowances were due to differences of opinion, not concealment of income. The CIT(A) observed that the issue of interest disallowance was debatable as different High Courts had varying views on the matter, leading to the cancellation of penalties related to interest and depreciation claims.

Issue 3:
The CIT(A) further noted that the assessee had been allowed higher rates of depreciation in previous years, indicating a bonafide claim. The Tribunal upheld the findings, stating that there was no concealment of income, and the disallowances were due to differences in interpretation, not deliberate concealment. The Tribunal concurred that the assessee had made bonafide claims, and there was no intention to evade taxes. The appellant-revenue failed to establish any illegality or perversity in the findings, leading to the dismissal of the appeal as no substantial question of law arose.

In conclusion, the judgment highlighted the importance of bonafide claims by the assessee, the absence of concealment of income, and the significance of differences of opinion in tax assessments. The decision emphasized the need for thorough examination of claims and differences in interpretation before imposing penalties under the Income Tax Act.