2019 (1) TMI 33 - AT - Income Tax

Penalty u/s 271(1)(c) - addition u/s 40(a)(ia) in respect of provision made or the disallowance of corporate membership subscription for 9 years in advance - Held that - When the assessee had revealed all the facts and the allegation is that in spite of the view of the auditors that since tax had not been deducted at source on some amount, the details of which are well furnished and the assessee entertained an information that the year end provision for expenses which are reversed at the beginning of the next year are not liable to deduction at source, such amounts were prima facie inadmissible u/s 40(a)(ia). This is a debatable issue. When all such material is available before the AO with two views expressed and the AO took one of such views then where is the question of concealment of income or furnishing of inaccurate particulars thereof? Law does not say that wherever the AO disallow any claim, penalty should invariably be levied. CIT(A) is perfectly justified in placing reliance on the decision of the Hon ble Apex Court in the case of Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT Addition of corporate membership payment - CIT(A) found that it is not as if the amount was claimed fraudulently without actual payment but it was onetime payment for a period of 10 years and if the ingredients of Section 37(1) are examined, such an expenditure cannot be denied - Held that - We are in agreement with the observation of the learned CIT(A) that it is a matter of difference of opinion between the assessee and the AO in so far as the advance nature of the payment is concerned and merely because the assessee does not carry the matter in further appeal in view of the smallness of the amount involved, it does not mean that the assessee conceded to have either concealed the income or furnished inaccurate particulars thereof. When there cannot be any penalty under law, merely because the assessee does not prefer further quantum appeal, it does not create jurisdiction for the AO to levy the penalty. - decided against revenue.

Summary

Issues:
Challenging the deletion of penalty by ld.CIT(A) for Asstt. Year 2008-09.

Detailed Analysis:

1. Background:
The assessee, a company engaged in the distribution of hydraulic excavators, filed a return declaring a loss for the Asstt. year 2008-09. The AO made additions in the assessment, which were partly confirmed by the first appellate authority.

2. Penalty Proceedings:
The AO initiated penalty proceedings as the assessee did not appeal against the additions made by the first appellate authority. A penalty of ?24,65,700 was levied.

3. CIT(A) Decision:
The CIT(A) found that the assessee did not conceal any information or furnish inaccurate particulars. Citing the Reliance Petroproducts case, the CIT(A) held that mere disallowance of a claim does not imply concealment of income.

4. Applicability of Deeming Provisions:
The CIT(A) emphasized that penalties are applicable only if the failure on the part of the assessee is without reasonable cause. The burden is on the assessee to show the existence of a reasonable cause.

5. Revenue's Argument:
The Revenue contended that the assessee accepted the sustained additions by not appealing further. They argued that the disallowance of certain provisions and advance payments amounted to furnishing inaccurate particulars.

6. Assessee's Defense:
The assessee maintained that the expenses were genuine and cited various legal precedents to support their position. They argued that the disputed issues were debatable and did not warrant penalty.

7. Tribunal's Decision:
The Tribunal noted that the Revenue did not accuse the assessee of non-disclosure or claiming deductions for bogus expenditures. The disputed amounts were revealed in audited reports. The Tribunal agreed with the CIT(A) that the issues were debatable and penalty was not justified.

8. Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing that the disputed issues did not amount to concealment of income or furnishing inaccurate particulars. The appeal of the Revenue was dismissed.

In summary, the Tribunal found in favor of the assessee, ruling that the penalty was not justified due to the debatable nature of the issues and the absence of concealment or inaccurate particulars.