2013 (11) TMI 1510 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of Deemed dividend u/s 2(22)(e) - whether amounts to concealment of income - Held that - The assessee has taken the amount for meeting normal business transaction and travelling and other expenses - The assessee s explanation that the addition was on account of deeming provision of which he was not aware is sufficiently cogent - The assessee s contention that no material was suppressed - There was no malafide intention on the part of the assessee to evade the tax - It was an inadvertent error which was genuine and bonafide - Following Dilip Sheroff case 2007 (5) TMI 198 - SUPREME Court - Mensrea was a essential requirement of penalty u/s 271(1)(c) - Following Hindustan Steel vs. State of Orissa 1969 (8) TMI 31 - SUPREME Court - Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute - Decided against Revenue.

Summary

Issues:
- Penalty under section 271(1)(c) for deletion of deemed dividend amounting to Rs. 5,84,553.

Analysis:
- The appeal by the Revenue challenged the deletion of penalty under section 271(1)(c) by the Ld. CIT(A) related to the deemed dividend amount of Rs. 5,84,553.
- The assessee, a proprietor of a company dealing in imports, also served as a director of another company dealing in exports. Loans and advances amounting to Rs. 27,90,906 were taken from the second company, considered as "deemed dividend" under section 2(22)(e) of the Act.
- The AO initiated penalty proceedings for concealment of income due to the deemed dividend, which was later restricted to Rs. 17,67,450 by ITAT Delhi.
- The Ld. CIT(A) deleted the penalty based on the assessee's argument that the transactions were part of normal business activities and were disclosed properly, citing the decision in C.I.T. vs. Reliance Petroproducts Pvt. Ltd.
- The ITAT upheld the Ld. CIT(A)'s decision, emphasizing that the assessee made full disclosures, had no malafide intent to evade tax, and the penalty provisions should not apply in cases of inadvertent errors as per the decision in CIT vs. Reliance Petro Products Ltd.
- The ITAT also referred to the Hindustan Steel case, highlighting that penalties should not be imposed in cases of technical breaches or where the offender believed they were acting in accordance with the law.
- Ultimately, the ITAT dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to delete the penalty under section 271(1)(c).

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments presented, legal precedents cited, and the final decision rendered by the ITAT.