2022 (5) TMI 1340 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made on account of social forestry expenses - CIT-A deleted the penalty levy - HELD THAT - CIT(A) deleted the penalty on the ground that in assessee s own case for the A.Y. 2011-12 identical issue had been decided in favour of the assessee and against the revenue by the earlier ld. CIT(A) by following the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts (P) Ltd. 2010 (3) TMI 80 - SUPREME COURT as held that mere making of claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the assessee. No new facts and circumstances has been brought on record by the ld. CIT-DR to controvert the findings so recorded by the ld. CIT(A), therefore, considering the totality of facts and circumstances, we do not find any reason to deviate from the findings of the ld. CIT(A), which we affirms the same. Addition u/s 80IA - CIT(A) has deleted the addition by observing the fact that the Assessing officer has not found any specific instance of furnishing of inaccurate particulars or concealment of details. All details were furnished, including audited accounts and impugned addition is a result of change in method/manner of allocation of expenses to the different units, which was a difference of opinion. CIT(A) by following the decision of Hon'ble Supreme Court in the case of Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT and Shri Rama Multi Tech 2013 (1) TMI 800 - GUJARAT HIGH COURT Gujarat Insecticides Ltd. 2013 (10) TMI 159 - GUJARAT HIGH COURT had deleted the penalty levied by the Assessing officer. No new facts and circumstances has been brought on record by the ld. CIT-DR to controvert the findings so recorded by the ld. CIT(A), therefore, considering the totality of facts and circumstances, we do not find any reason to deviate from the findings of the ld. CIT(A), which we affirms the same. Addition of club expenses - CIT(A) had deleted the penalty levied with regard to club expenses. No new facts and circumstances has been brought on record by the ld. CIT-DR to controvert the findings so recorded by the ld. CIT(A), therefore, considering the totality of facts and circumstances, we do not find any reason to deviate from the findings of the ld. CIT(A), which we affirms the same. Addition on account of deployment of funds credited to capital work - Hon'ble Supreme Court in case of CIT v. Bokaro Steel Ltd. 1998 (12) TMI 4 - SUPREME COURT and in the case of NTPC Sail Power Company P. Ltd 2012 (10) TMI 524 - DELHI HIGH COURT held that interest earned on surplus funds which are inextricably linked to the setting up of the project is a capital receipt not to be taxed as revenue receipts. CIT(A) has also held that the accounting treatment given by assessee results only in delaying the tax effect, (in form of reduction in claim of depreciation as the project cost is reduced) so it is a dispute of year of taxation. It was further held that the accounting treatment was explained in notes to accounts forming part of balance sheet. CIT(A) held that Assessing officer has not given finding of any instance of furnishing inaccurate particulars or of concealment of particulars of income. The impugned penalty levied on addition made due to difference in opinion cannot be sustained and the ld. CIT(A) had deleted the penalty. Disallowance under Section 40(a)(ia) - disallowance is made solely for not making TDS. The Assessing Officer has not questioned genuineness of expenses or questioned the purpose of expenses. The explanation of the assessee was that they believed that no TDS to be made as per ratio lay down by Hon'ble Supreme Court in CIT v. Kotak Securities Lid. 2016 (3) TMI 1026 - SUPREME COURT CIT(A) has further held that the assessee s case is squarely covered by decision of Dahyabhai Veliibhc Patel 2013 (1) TMI 849 - ITAT AHMEDABAD as held that when genuineness of expenditure is not questioned disallowance made merely on ground that TDS is not deducted penalty u/ 271(1)(c) cannot be imposed. No new facts or law is brought to our notice to take other view, therefore, considering the totality of facts and circumstances, we do not find any reason to deviate from the findings of the ld. CIT(A), which we affirms the same. Decided against revenue.

Issues Involved:
1. Deletion of penalty on technical grounds under Section 271(1)(c) of the Income Tax Act.
2. Deletion of penalty on social forestry expenses.
3. Deletion of penalty on reduction of deduction claimed under Section 80IA.
4. Deletion of penalty on club expenses.
5. Deletion of penalty on income from deployment of FCCB funds.
6. Deletion of penalty under Section 40(a)(ia) for non-deduction of TDS.

Issue-wise Detailed Analysis:

1. Deletion of Penalty on Technical Grounds:
The Revenue argued that the Commissioner of Income Tax (Appeals) [CIT(A)] was not justified in deleting the penalty of Rs. 4,21,36,403/- on the technical ground that the Assessing Officer (AO) did not strike off the inapplicable limbs of Section 271(1)(c) while initiating and levying the penalty. The CIT(A) held that the assessee understood the notice's purport and import, and thus, the penalty was deleted on technical grounds.

2. Deletion of Penalty on Social Forestry Expenses:
The AO disallowed expenses claimed on account of social forestry and depreciation on assets used for social forestry, amounting to Rs. 4,23,000/-. The CIT(A) deleted the penalty, observing that similar disallowances in earlier years were either substantially deleted or restricted on an ad-hoc basis. The CIT(A) relied on the Supreme Court's decision in CIT Vs Reliance Petroproducts (322 ITR 158 SC), stating that mere making of a claim which is not sustainable in law does not amount to furnishing inaccurate particulars.

3. Deletion of Penalty on Reduction of Deduction Claimed under Section 80IA:
The AO disallowed Rs. 2,52,99,629/- claimed under Section 80IA for a power generation unit, alleging the assessee furnished inaccurate particulars. The CIT(A) deleted the penalty, noting that the AO did not find any specific instances of furnishing inaccurate particulars or concealment. The CIT(A) held that the addition was due to a difference in the method of expense allocation, which is a matter of opinion and not concealment.

4. Deletion of Penalty on Club Expenses:
The AO disallowed Rs. 5,00,000/- claimed as club expenses, stating the assessee furnished inaccurate particulars. The CIT(A) deleted the penalty, noting that the membership fees and subscription fees are allowable expenditures. The CIT(A) observed that the AO disallowed an estimated figure due to a difference of opinion on what constitutes business purpose, which does not warrant a penalty.

5. Deletion of Penalty on Income from Deployment of FCCB Funds:
The AO added Rs. 10,36,47,628/- as income from deployment of FCCB funds, treating it as revenue receipts instead of capital receipts. The CIT(A) deleted the penalty, holding that the addition was due to a difference of opinion on the treatment of such income. The CIT(A) noted that the assessee disclosed the income in the notes to accounts, and the AO did not find any specific instances of furnishing inaccurate particulars.

6. Deletion of Penalty under Section 40(a)(ia) for Non-deduction of TDS:
The AO disallowed Rs. 12,00,000/- under Section 40(a)(ia) for non-deduction of TDS on foreign remittance. The CIT(A) deleted the penalty, stating that the disallowance was solely due to non-deduction of TDS and not due to the genuineness of the expenses. The CIT(A) relied on the Supreme Court's decision in CIT Vs Kotak Securities Ltd, where it was held that when the genuineness of the expenditure is not questioned, penalty under Section 271(1)(c) cannot be imposed.

Conclusion:
The Tribunal affirmed the CIT(A)'s decision to delete the penalties on all issues, noting that the additions were due to differences in opinion, method of allocation, or interpretation of law, and not due to furnishing inaccurate particulars or concealment of income. The appeal of the Revenue was dismissed.

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