2010 (9) TMI 155 - HC - Income Tax

Penalty - Deduction under Sections 80-1A and 80-IB - not allowed assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income - Held that - Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271 (1)(c) No substantial question of law

Issues Involved:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act.
2. Allegation of findings by the Income Tax Appellate Tribunal being perverse.
3. Legality of dismissing the appeal of the department based on the debatable issue of expense allocation.
4. Correctness of ITAT's decision to follow a previous judgment.
5. Disagreement between ITAT and Assessing Officer on claiming expenses under section 80 IA.
6. Appellant's request to modify any question of law during the appeal.

Issue 1: Deletion of Penalty under Section 271(1)(c):
The appeal challenged the ITAT's order deleting a penalty of Rs.20,22,944 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act. The CIT(A) had expressed the view that the penalty proceedings were unwarranted and subsequently deleted the penalty. The tribunal upheld this decision, emphasizing that the computation of deductions under sections 80-1A and 80-IB was a debatable issue, leading to the dismissal of the revenue's appeal.

Issue 2: Allegation of Perverse Findings:
The revenue contended that the ITAT's findings were perverse as it allegedly disregarded relevant material and evidence. However, the ITAT justified its decision by stating that the allocation of expenses between the head office and the unit was inherently debatable. The tribunal's reliance on the CIT(A)'s order and a previous judgment supported its conclusion in dismissing the appeal.

Issue 3: Dismissal of Appeal Based on Expense Allocation:
The department questioned the legality of dismissing their appeal on the grounds that the allocation of expenses between the head office and the unit was a debatable issue. The tribunal maintained that this aspect was indeed debatable, citing previous judgments to support its decision to not interfere with the CIT(A)'s order.

Issue 4: Correctness of ITAT's Decision to Follow Previous Judgment:
The ITAT's decision to follow a previous judgment from the ITAT Jaipur Bench was challenged. The appellant raised concerns about the correctness of this decision, particularly in the context of sections 80 HH and 80 I of the Income Tax Act.

Issue 5: Disagreement on Claiming Expenses under Section 80 IA:
A disagreement arose between the ITAT and the Assessing Officer regarding the claiming of expenses under section 80 IA. The Assessing Officer argued that claiming expenses not debitable to the units in question, for which deduction under section 80 IA was claimed, amounted to furnishing inaccurate particulars of income attracting penalty under section 271(1)(c).

Issue 6: Appellant's Request to Modify Questions of Law:
The appellant sought permission to add, alter, or modify any question of law during the appeal process. However, the judgment did not delve into specific modifications made by the appellant during the proceedings.

In conclusion, the High Court dismissed the appeal, finding it devoid of merit based on the legal principles established by the Apex Court regarding the imposition of penalties under section 271(1)(c) of the Income Tax Act. The judgment emphasized the importance of accurate particulars and the absence of mens rea in determining the applicability of penalties, ultimately upholding the decision of the ITAT in deleting the penalty imposed on the assessee.

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