2008 (12) TMI 355 - HC - Income Tax

Business Expenditure- The Assessing Officer did not accept computation of deduction claimed by the assessee under section 80HHC of the Act while adding back the amount wrongly claimed to be deduction, penalty was also imposed. On appeal, the Commissioner of Income-tax (Appeals) deleted the penalty on the ground that merely for raising a debatable issue, penalty could not be imposed, in the absence of any concealment or misrepresentation by the assessee. The said finding has been affirmed by the Tribunal. Held that- In view of the finding concurrently recorded by the Commissioner of Income-tax (Appeals) and the Tribunal that there was no concealment or misrepresentation by the assessee, there is no fault with the impugned order setting aside the levy of penalty. The appeal is dismissed.

Summary

Issues:
1. Interpretation of penalty under section 271(1)(c) of the Income-tax Act for excess deduction claimed under section 80HHC.
2. Applicability of penalty under section 271(1)(c) in light of conflicting judicial decisions.
3. Requirement of proving contumacious intent for penalty levy.
4. Consideration of case law in determining book profits under section 115JA.

Analysis:

Issue 1:
The appeal was filed by the Revenue against the order of the Income-tax Appellate Tribunal regarding the penalty imposed under section 271(1)(c) of the Income-tax Act for excess deduction claimed by the assessee under section 80HHC. The Tribunal upheld the deletion of penalty by the Commissioner of Income-tax (Appeals) on the grounds that the penalty cannot be imposed merely for raising a debatable issue without any concealment or misrepresentation by the assessee.

Issue 2:
The Tribunal considered conflicting judicial decisions, including the order of the Madras High Court in a specific case, and the provisions of section 271(1B) of the Income-tax Act. It was questioned whether the Tribunal's decision to delete the penalty was correct, especially when the Assessing Officer had initiated penalty proceedings under section 271(1)(c) in the assessment order.

Issue 3:
The Tribunal deliberated on the requirement of proving contumacious intent for the levy of penalty under section 271(1)(c) in contravention of civil statutes like the Income-tax Act. The Tribunal analyzed the necessity of proving concealment or misrepresentation by the assessee as essential ingredients for imposing the penalty.

Issue 4:
The Tribunal examined the applicability of case law in CIT v. N. Krishnan in the context of determining book profits under section 115JA. The Tribunal considered whether reliance on this case law was appropriate in a scenario where the issue pertained to book profits assessment and not loss assessment.

The Tribunal ultimately dismissed the appeal, emphasizing that no substantial question of law arose, as there was no concealment or misrepresentation by the assessee. The judgment highlighted the importance of the factual matrix and the absence of any deliberate intent to conceal income, leading to the deletion of the penalty.