2012 (3) TMI 77 - AT - Income Tax

Fee paid to Registrar of Co. & Stamp Duty claimed as deduction - Penalty Proceedings Initiated - Held That - Penalty can be levied for inaccurate particulars and not inaccurate claim. Further order was passed without taking into consideration reply dated 31.8.2006 filed by the assessee. An order passed in oblivion of, or without considering, the pleadings brought on record, amounts to an order passed without application of mind and such an order is a non est order lacking legal validity and force. Decided against revenue.

Summary

Issues:
1. Challenge to deletion of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.
2. Claim of disallowable expenses by the assessee.
3. Assessment of penalty for understatement of profit and furnishing inaccurate particulars of income.
4. Consideration of bonafide mistake by the assessee.
5. Non-consideration of detailed explanation by the Assessing Officer in the penalty order.

Analysis:
1. The department appealed against the deletion of a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 by the CIT(A) for assessment year 2003-04. The penalty was related to the disallowance of filing fee and stamp duty claimed as expenses by the assessee company. The Assessing Officer held the claims as false, leading to understatement of profit and furnishing inaccurate particulars of income.

2. The Assessing Officer disallowed the filing fee and stamp duty claimed by the assessee as revenue expenditure, stating that the expenses were capital in nature based on a Supreme Court decision. The penalty was imposed due to the alleged false claim of disallowable expenses by the assessee.

3. The department contended that the penalty was rightly levied as the expenses were covered under section 35D of the Income Tax Act, and the claim was untenable. The department argued that the assessee's explanation was insufficient and that the penalty should be reinstated based on previous court decisions.

4. The assessee defended the claim, stating it was made in good faith and any mistake was inadvertent. The assessee argued that there was no intention to conceal income, and all necessary details were provided. The assessee maintained that the claim was bona fide, and reliance was placed on various case laws to support their position.

5. The ITAT found that the Assessing Officer did not consider the detailed explanation provided by the assessee before imposing the penalty. The failure to acknowledge and address the explanation in the penalty order rendered it invalid. The ITAT upheld the CIT(A)'s decision to delete the penalty, emphasizing the importance of considering all relevant information before imposing penalties.

In conclusion, the ITAT dismissed the department's appeal, highlighting the necessity for proper consideration of explanations provided by taxpayers before imposing penalties under the Income Tax Act. The judgment emphasized the importance of due process and the requirement for assessing officers to thoroughly review all relevant details before making penalty decisions.