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2019 (2) TMI 1199 - AT - Income TaxLevy of penalty u/s 271(1)(c) - disallowance of provisions for doubtful debts, electricity duty and sales tax set off - HELD THAT - As the claim of aforesaid expenses is discernible from the return of income profit and loss account balance-sheet hence the same it is not amount to concealment of income or furnishing inaccurate particulars of income. This is a factual position, therefore, the penalty u/s 271(1)(c) of the Act is not leviable. We are, therefore, of the considered view that the penalty is not sustainable in the law in the light of ratio laid down by Hon ble Supreme Court in the case of CIT Vs. Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT wherein it was held that merely because the assessee has claimed the expenditure which claimed was not accepted or was not acceptable by revenue, penalty u/s 271(1)(c) of the Act cannot be attracted. Thus penalty is not exigible in respect of disallowance of provisions for doubtful debts, electricity duty and sales tax set off. - Decided in favour of assessee.
Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Confirmation of penalty by CIT(A) without a speaking order. 3. Furnishing of inaccurate particulars of income by the assessee. Issue-wise Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue revolves around the levy of penalty amounting to ?8,64,784/- for the A.Y. 2003-04 and ?5,57,212/- for the A.Y. 2004-05 under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed due to the assessee allegedly furnishing inaccurate particulars of income. The additions were made for provisions for doubtful debts, electricity duty disallowed under Section 43B, and sales tax set off not offered for tax. The assessee argued that all particulars were furnished, and the claims were bona fide. The Tribunal noted that the assessee had disclosed all relevant facts and that the penalty cannot be levied merely because the claims were not accepted by the AO. The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings, and mere disallowance does not automatically attract penalty. The Tribunal relied on the Supreme Court decision in CIT Vs. Reliance Petroproducts Pvt. Ltd. and other relevant case laws to conclude that the penalty was not sustainable. 2. Confirmation of Penalty by CIT(A) Without a Speaking Order: The assessee contended that the CIT(A) erred by confirming the penalty without passing a speaking order, especially in light of the Supreme Court decision in CIT Vs. Reliance Petroproducts Pvt. Ltd. The Tribunal observed that the CIT(A) upheld the penalty on the grounds that the assessee furnished inaccurate particulars of income despite being assisted by professional chartered accountants. The Tribunal, however, found that the CIT(A) did not adequately address the assessee's arguments and the relevant case laws, thereby failing to provide a reasoned order. 3. Furnishing of Inaccurate Particulars of Income by the Assessee: The Tribunal analyzed whether the assessee furnished inaccurate particulars of income. The assessee argued that the provision for doubtful debts was actually written off, and thus allowable under the law. The Tribunal referred to the Supreme Court decision in Vijaya Bank Vs. CIT, which held that reducing the debtors' balance suffices for claiming a deduction. Similarly, for the electricity duty disallowance, the Tribunal noted that the duty was disclosed in the profit and loss account and was offered for tax in the subsequent year, making the claim bona fide. Regarding the sales tax set off, the Tribunal found that the assessee followed a consistent accounting method, making the issue debatable and not warranting a penalty. The Tribunal concluded that the assessee's explanations were bona fide and all facts were disclosed, thus, the penalty under Section 271(1)(c) was not justified. Conclusion: The Tribunal allowed the appeals for both assessment years, deleting the penalties levied under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal emphasized that the assessee had made full disclosures and the claims were bona fide, thus, no penalty was warranted. The order was pronounced in the open Court on 14.02.2019.
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