2024 (6) TMI 1362 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - disallowance of prior period expenditure, ad hoc disallowance of non filing of relevant documents in relation to valuation on costs of construction improvement and as per the statements of the assessee, assessee has inadvertently claimed the higher share of indexed costs of construction and improvement - HELD THAT - As submitted that the assessee has not benefited by inadvertently claiming the excess indexed costs of improvement. In this regard, he brought to our notice that assessee has made investment in capital gain and whatsoever the additional interest earned by the assessee are being utilized only in purchasing new assets. As relying on RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT it is clear that mere claim does not sustainable in law by itself will not amount to furnishing of inaccurate particulars of income, therefore, additions made by the Assessing Officer relating to prior period and ad hoc disallowance are concern, it is merely claimed by the assessee as allowable expenses and, however, was rejected by the Assessing Officer, therefore, this cannot be a reason for levy of penalty. Additional construction indexed costs of improvement by the assessee - As noticed that assessee having 1/4th share in the property has claimed inadvertently and additional amount of Rs. 15,82,909/-. From the records, as observed that assessee has not availed any benefit by such inadvertent claim; therefore, no reason to levy of penalty by treating that as inaccurate particulars of income, Assessing Officer has to bring to record, how the assessee has benefited by such furnishing of inaccurate particulars. Accordingly, the appeal filed by the assessee is allowed.

Summary

Issues:
Assessment of disallowed expenses under CASS scrutiny, appeal against disallowances, imposition of penalty under section 271(1)(c) of the Act, appeal against penalty imposition.

Analysis:
1. The appeal was filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals) for Assessment Year 2016-17. The Assessee declared a total business loss and claimed a refund. The case underwent complete scrutiny under CASS, leading to the disallowance of certain expenditures by the Assessing Officer.

2. The disallowed expenses included prior period expenses, deduction claimed under section 54 of the Act, and indexed cost of construction and improvement. The Assessing Officer disallowed specific amounts based on discrepancies in valuation reports and lack of supporting bills or vouchers for claimed expenses.

3. The Assessee appealed before the Commissioner of Income Tax (Appeals) who allowed the claim under section 54 but upheld the other disallowances. Subsequently, the Assessing Officer imposed a penalty under section 271(1)(c) of the Act. The penalty was based on disallowed expenditures and deductions, leading to alleged concealment of taxable income.

4. The Assessee appealed the penalty imposition, arguing against the automatic levy of penalty and citing various case laws to support their position. The Appellate Tribunal considered the submissions and observed that the disallowances made by the Assessing Officer did not warrant the imposition of a penalty.

5. The Tribunal referred to the case of Reliance Petro Products Pvt. Ltd. where it was highlighted that a mere claim not sustainable in law does not amount to furnishing inaccurate particulars of income. Therefore, the disallowances made by the Assessing Officer, even if rejected, were not sufficient grounds for penalty imposition.

6. Regarding the additional construction indexed costs claimed inadvertently by the Assessee, the Tribunal noted that the Assessee did not benefit from the inadvertent claim. Without evidence of how the Assessee gained from furnishing inaccurate particulars, the Tribunal deemed the penalty unjustified and allowed the Assessee's appeal.

7. In conclusion, the Tribunal allowed the appeal filed by the Assessee, emphasizing that the disallowances made by the Assessing Officer did not merit the imposition of a penalty under section 271(1)(c) of the Act. The decision was pronounced on 27th June, 2024.