2023 (1) TMI 40 - AT - Income Tax

Penalty u/s 271(1)(c) - quantum disallowances/additions made by the AO regarding the assessee s section 80IA deduction raised for the first time in section 153A assessments completed in furtherance to the search - HELD THAT - We see no reason to accept the Revenue s stand. We make it clear that the hon ble Apex court s landmark decision in CIT Vs. Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT has settled the law long back that quantum and penalty proceedings are parallel in nature wherein each and every disallowance/addition made in the course of the former does not ipso facto attracts the latter provision. Hon ble jurisdictional high court s decision in PCIT Vs. JSW Steel Ltd. 2020 (2) TMI 307 - BOMBAY HIGH COURT also holds that an assessee can very well raise its deduction claim for the first time in section 153A assessment proceedings. Mr. Jasnani could not pinpoint any exception to this proposition in section 153A itself qua raising of such a claim in abated or unabated assessments. Be that as it may, we make it clear that we are dealing with penalty proceedings only. We thus conclude that both the lower authorities have erred in law and on facts in imposing these penalties in the impugned four assessment years before us. The same are directed to be deleted. The assessee succeeds in its instant identical sole substantive grievance therefore.

Summary

Issues:
Assessment of penalties under section 271(1)(c) of the Income-tax Act, 1961 based on quantum disallowances/additions made by the Assessing Officer regarding section 80IA deduction in section 153A assessments for assessment years 2006-09 to 2009-10.

Analysis:

Issue 1: Quantum Disallowances/Additions Leading to Penalties
The appeals involved penalties imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 based on quantum disallowances/additions made regarding the assessee's section 80IA deduction in section 153A assessments. The penalties were confirmed by the Commissioner of Income Tax, Pune-11. The Tribunal noted that the penalties were related to the quantum disallowances/additions made by the Assessing Officer in the section 153A assessments completed after a search, and both lower authorities agreed that the penalties were applicable. The assessee was aggrieved by this decision.

Issue 2: Interpretation of Quantum Order
The Tribunal examined the quantum order dated 23-03-2018, which allowed the Revenue's appeals and restored the Assessing Officer's action in making the disallowance. The Tribunal disagreed with the Revenue's stance, highlighting that the acceptance of the Revenue's arguments was based on technical grounds related to the timing of claiming the deduction in section 153A assessments. The Tribunal emphasized that the quantum and penalty proceedings are parallel and not every disallowance in quantum assessments automatically attracts penalties.

Issue 3: Concealment of Income and Inaccurate Particulars
The Revenue argued that the assessee's act of claiming the section 80IA deduction in section 153A assessment proceedings amounted to concealing and furnishing inaccurate particulars of taxable income. However, the Tribunal referenced the Supreme Court's decision in CIT Vs. Reliance Petro Products (2010) and the jurisdictional high court's decision in PCIT Vs. JSW Steel Ltd. (2010) to establish that raising a deduction claim for the first time in section 153A assessments is permissible. The Tribunal concluded that the penalties imposed by the lower authorities were erroneous in law and on facts, directing their deletion.

Issue 4: Decision and Conclusion
The Tribunal held that the penalties imposed on the assessee for the section 80IA deduction claims in the section 153A assessments for the relevant years were unwarranted. Citing legal precedents, the Tribunal emphasized that penalty proceedings are distinct from quantum assessments, and the mere disallowance of a claim does not automatically lead to penalties. Consequently, the penalties were directed to be deleted, and the assessee's appeals were allowed. The Tribunal also condoned the delay in filing the appeals.

In conclusion, the Tribunal's judgment focused on the interpretation of the law regarding penalties imposed based on disallowances in quantum assessments, emphasizing the need for a clear distinction between quantum and penalty proceedings and ensuring that penalties are imposed only in cases of deliberate concealment or furnishing inaccurate particulars of income.