2019 (7) TMI 18 - AT - Income Tax

Penalty u/s 271(1)(c) - excess deduction under the said Chapter VI of the Act - assessee claimed the entire such expenditure as the expenditure of the ineligible unit in original return - revised return filed correcting allocation of the said generation expenses - HELD THAT - Penalty levied by the Assessing Officer and confirmed by the CIT(A) is unsustainable in law. The facts that the assessee filed the revised statements and his attempt to file the revised return, the payment of relevant taxes on the said additional/corrected income demonstrate the good faith of the assessee and the same shall shield the assessee from rigors of the penalty provisions u/s 271(1)(c). As such, the details of general expenditures are borne out of the return of income. The revised computation with correct allocation of the said expenditure between the eligible and ineligible undertakings cannot be directly attributable to the efforts of the Assessing Officer as no show cause was issued to the assessee on this issue of incorrect allocation of the said expenses. Thus, the grounds raised by the assessee should be allowed in favour of the assessee.

Summary

Issues:
Penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Penalty under section 271(1)(c)
The appeal was filed against the order of the CIT(A) for the assessment year 2009-10, challenging the penalty of ?13,04,400 levied under section 271(1)(c) of the Income Tax Act. The assessee initially claimed a higher deduction by incorrectly allocating general expenses between eligible and non-eligible undertakings. Subsequently, a revised return was filed correcting this mistake, reducing the deduction claimed. The assessee argued that the revised return was filed before the completion of assessment, demonstrating good faith. The assessee contended that the corrections were made voluntarily and not due to any investigation by the Assessing Officer. Various judgments were cited to support the argument that penalties are not applicable when corrections are made in good faith before detection by tax authorities.

Issue 2: Good Faith and Corrective Actions
The assessee demonstrated that the revised statements were filed before the assessment was completed, showing a genuine attempt to rectify the error. The payment of relevant taxes on the corrected income further indicated good faith. The Tribunal found the arguments presented by the assessee to be sustainable, holding that the penalty imposed was unsustainable in law. The Tribunal noted that the revised computation correcting the allocation of expenses was not prompted by any action from the Assessing Officer, as no show cause was issued on this matter. Therefore, the Tribunal allowed the appeal in favor of the assessee, emphasizing the good faith efforts made by the assessee to rectify the error voluntarily.

Conclusion:
The Tribunal ruled in favor of the assessee, setting aside the penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income. The decision was based on the assessee's voluntary corrective actions, filing of revised returns before assessment completion, and payment of relevant taxes on the corrected income, demonstrating good faith and compliance with tax regulations. The Tribunal held that the penalty provisions were not applicable in this case, as the corrections were made proactively by the assessee without any prompting from the tax authorities.