2018 (12) TMI 324 - AT - Income Tax

Penalty u/s 271(1)(c) - claim of loss made on the basis of tax audit report - Held that - The assessee had made ineligible claim, for which the bona fide of the assessee stands proved from the fact that as per Form No. 3CD, at item no. 17(a), the auditor has reported that there is no expenditure of capital nature which has been debited to the profit and loss account. Therefore, in our considered opinion, the claim of loss made on the basis of tax audit report cannot be said to be non-bona fide. As gone through the decisions relied by the CIT(A) and we find that in the present scenario, the said decisions are found applicable to the case in hand and the distinguishing features given in the grounds of appeal are not found tenable in the eyes of law. It is also worth consideration that at the initial stage of original assessment, the assessee had claim similar loss, which was partly accepted by AO and penalty proceedings initiated at that point of time were also dropped. Therefore, there appear different opinions of revenue authorities at different points of time. As relying on decision in CIT vs. Reliance Petro Products Pvt. Ltd, 2010 (3) TMI 80 - SUPREME COURT where it has been held that mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. - Decided against revenue.

Issues:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Applicability of case laws and legal precedents.
3. Assessment of claimed losses and expenses.
4. Reopening of assessment and penalty imposition.

Issue 1: Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961:

The appeal was against the deletion of a penalty of ?25,62,569 imposed under section 271(1)(c) by the Assessing Officer. The Revenue contended that the penalty was wrongly deleted by the ld. CIT(A) based on the argument that there was no bona fide on the part of the assessee to claim a capital loss as revenue loss, thus furnishing inaccurate particulars of income. However, the Tribunal upheld the deletion of the penalty by the ld. CIT(A) based on various considerations, including the disclosure of the loss on sale of assets in the profit and loss account, the auditor's report, and the applicability of legal precedents such as the decision in CIT vs. Reliance Petro Products Pvt. Ltd. The Tribunal found that the claim of loss made based on the tax audit report could not be deemed non-bona fide, and there were differing opinions of revenue authorities at different stages, leading to the conclusion that the penalty notice itself was defective for not specifying a particular charge.

Issue 2: Applicability of case laws and legal precedents:

The ld. CIT(A) relied on various legal precedents, including the decision in M/s Reliance Petroproducts and Price Water House Coopers Vs CIT, to support the deletion of the penalty. The Tribunal analyzed these precedents and found them applicable to the case at hand. Specifically, the Tribunal noted that the mere making of a claim not sustainable in law does not amount to furnishing inaccurate particulars regarding the income of the assessee. The Tribunal also considered the auditor's report, which stated that there was no expenditure of capital nature debited to the profit and loss account, further supporting the conclusion that the claim of loss was not non-bona fide.

Issue 3: Assessment of claimed losses and expenses:

The assessment involved the claim of losses and expenses by the assessee, which led to the initiation of penalty proceedings under section 271(1)(c). The Assessing Officer made additions to the declared loss, which resulted in penalty proceedings being initiated. The reassessment was completed, making additional observations on the claimed losses and expenses. The Tribunal considered the nature of the claimed losses and expenses, the audit report, and the subsequent penalty imposition in its analysis of the case.

Issue 4: Reopening of assessment and penalty imposition:

The case involved the reopening of assessment based on certain observations by the Assessing Officer regarding the claimed losses and expenses. The reassessment led to the imposition of a penalty under section 271(1)(c), which was subsequently deleted by the ld. CIT(A) and upheld by the Tribunal. The Tribunal found that the penalty imposition was not justified based on the facts and circumstances of the case, including the disclosure of the losses in the profit and loss account and the absence of a specific charge in the penalty notice.

In conclusion, the Tribunal dismissed the appeal of the Revenue and upheld the deletion of the penalty under section 271(1)(c) by the ld. CIT(A) based on the findings related to the claimed losses, legal precedents, and the defective nature of the penalty notice.

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