2012 (11) TMI 178 - AT - Income Tax

Penalty under section 271(1)(c) of the Income-tax Act - addition made to book profits under Section 115JB of the Act Held that - Provision for bad and doubtful debts which has been disallowed by the Assessing Officer on the ground that the same was contingent in nature - assessee has pointed out that it was under bonafide belief that the Provision for bad and doubtful debts debited in the Profit and Loss Account is not a provision for liability but a diminution in the value of assets and therefore it was allowable while computing book profits as per Section 115JB of the Act - no default within the meaning of 271(1)(c) of the Act can be attributed to the assessee - at the time of filing of return the issue in question was debatable where two view were possible and therefore such a claim made in return of income, though found untenable by the Assessing Officer, cannot be construed as furnishing of inaccurate particulars of income within the meaning of Section 271(1)(c) of the Act in favor of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 2004-05.

Detailed Analysis:

1. Grounds of Appeal:
The appeal concerns the penalty of Rs. 1,47,90,000 imposed by the Assessing Officer under section 271(1)(c) of the Act. The Revenue challenges the deletion of penalty by the CIT(A) for furnishing inaccurate particulars of income. The disputed additions include gain on prepayment of sales tax deferral loan, software expenses, repairs to plant and machinery, and provision for doubtful debts.

2. Assessment and Additions:
The Assessing Officer determined the income under normal provisions as NIL and under Section 115JB at Rs. 13,17,08,443. Various additions were made, totaling Rs. 37,378,483 under normal provisions and Rs. 31,70,092 for provision for bad and doubtful debts under Section 115JB.

3. Legal Arguments:
The Revenue argued that penalty should apply even if income is assessed under Section 115JB, citing Section 115JB(5) that makes all other Act provisions applicable. The respondent contended that penalty is not applicable as the final income was assessed under Section 115JB. Case laws were cited to support this position.

4. Decision on Normal Provisions Additions:
The Tribunal upheld the CIT(A)'s decision to delete the penalty on additions made under normal provisions. Citing case law, it reasoned that since tax was paid on income assessed under Section 115JB, penalty under section 271(1)(c) was not justified for the normal provisions additions.

5. Decision on Provision for Doubtful Debts:
Regarding the addition for provision for doubtful debts under Section 115JB, the Tribunal found no default by the assessee. The Tribunal noted that the issue was debatable at the time of filing the return, supported by Tribunal decisions. Thus, the penalty under section 271(1)(c) was not warranted.

6. Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the penalty. The decision was based on different grounds for each set of additions, concluding that no penalty under section 271(1)(c) was justified in this case.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the arguments presented and the Tribunal's decision on each aspect of the penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2004-05.