2018 (12) TMI 1056 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition on account of foreign fluctuation loss and on account of disallowance u/s 40(a)(ia) - Held that - Undoubtedly the penalty was levied on account of disallowance of the claim of loss of foreign exchange and disallowance of claim u/s 40(a)(ia). The assessee nowhere concealment the income or furnished the inaccurate particulars of income. In view of the above mentioned law disallowance of claim of the assessee nowhere attract the penalty. Therefore in the said circumstances and in view of the law relied by the Ld. Representative of the assessee, we set aside the finding of the CIT(A) on the issue and delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for disallowance of foreign exchange loss claim and expenses under section 40(a)(ia) of the Act.

Analysis:
The appeal was filed against the Commissioner of Income Tax (Appeals)-2, Mumbai's order confirming the penalty levied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act for the assessment year 2008-09. The assessee, engaged in waterproofing, restoration, and civil contract works, had claimed a foreign exchange loss of ?12,90,079 and expenses of ?3,65,841 under administrative and selling expenses, which were disallowed and added to the income. The penalty of ?5,97,203 was imposed due to these disallowances.

The argument presented was that the disallowance of the foreign exchange loss claim and expenses under section 40(a)(ia) of the Act did not warrant a penalty. Citing precedents like ACIT Vs. Seaways Shipping Ltd., the representative contended that mere disallowance of expenditure does not amount to furnishing inaccurate particulars of income. The Tribunal referred to ACIT Vs. Bhoruka Logistic (P) Ltd., emphasizing that disallowance of expenditure does not per se indicate concealment of income. The Tribunal also considered the judgment in CIT Vs. Reliance Petro Products (P) Ltd., highlighting that claiming an expenditure not accepted by the AO does not automatically attract a penalty under section 271(1)(c).

After reviewing the case, the Tribunal concluded that the disallowances made did not constitute concealment of income or furnishing inaccurate particulars of income. Relying on legal precedents and the arguments presented, the Tribunal set aside the CIT(A)'s findings and deleted the penalty imposed on the assessee. Consequently, the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal's decision emphasized that disallowance of claims, in this case, did not warrant a penalty under section 271(1)(c) of the Income Tax Act as it did not amount to concealment of income or furnishing inaccurate particulars of income. The judgment highlighted the importance of legal precedents and the need for penalties to be justified based on the specific circumstances of each case.