2022 (10) TMI 937 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - mere treatment of an amount as revenue (by the AO) instead of capital (by the taxpayer) - HELD THAT - Revenue should prove that the claim made was not sustainable in law and also the assessee had concealed the particulars of income. In order to expose the assessee to penalty, the Revenue should show that there was contumacious conduct on the part of the assessee in suppressing the income in the return. The rejection of such a claim by the Appellate Tribunal does not amount to furnishing inaccurate particulars of income, thereby levying penalty u/s. 271(1)(c) of the Act as held by the Hon ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT Since the quantum appeal of the assessee is now pending before the Hon ble High Court, it is appropriate to rely upon the Hon ble Delhi High Court judgment in the case of PCIT, Central-11, vs. Harsh International Pvt. Ltd. 2020 (12) TMI 1082 - DELHI HIGH COURT . The Judicial discipline demand that until and unless the judgment of the Hon ble Jurisdictional High Court is reversed. It has to be respected and followed by the Tribunal functioning under the jurisdiction of that Court. Penalty levied u/s. 271(1)(c) for furnishing inaccurate particulars of income is hereby deleted.

Summary

Issues Involved:
Revenue's appeal against cancellation of penalty u/s. 271(1)(c) for A.Y. 2007-08.

Analysis:

Issue 1: Penalty u/s. 271(1)(c) - Claim of notional sales tax as capital in nature
The Revenue initiated penalty proceedings u/s. 271(1)(c) against the assessee for claiming notional sales tax as capital in nature. The assessee argued that the notional sales tax was a subsidy from the Government and not liable to tax, citing relevant case laws. The Assessing Officer imposed a penalty, rejecting the submissions, relying on a Supreme Court judgment. The CIT(A) deleted the penalty, stating that the claim being treated as revenue instead of capital did not amount to concealment u/s. 271(1)(c). The Revenue appealed, arguing that the claim constituted inaccurate particulars of income. However, the Tribunal held that making an incorrect claim in law does not equate to furnishing inaccurate particulars, following the Supreme Court's decision in Reliance Petroproducts case.

Issue 2: Debatable nature of subsidy issue
The assessee contended that the subsidy issue was debatable and pending before the High Court, thus the penalty u/s. 271(1)(c) could not be levied. The Tribunal noted that until the High Court's judgment, the issue remained debatable, citing a Delhi High Court judgment. Consequently, the penalty for furnishing inaccurate particulars of income was deleted, respecting the pending appeal challenging the quantum order.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the deletion of the penalty u/s. 271(1)(c) for A.Y. 2007-08. The decision was based on the finding that the claim, though incorrect in law, did not amount to furnishing inaccurate particulars of income. Additionally, the debatable nature of the subsidy issue, pending before the High Court, supported the deletion of the penalty.