2014 (1) TMI 885 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act - Disallowance u/s 145A - Disallowance of reserve for cash discount - Held that - The quantum order has set aside by the Tribunal and the matter has been remitted back to the file of the AO - the penalty proceedings which were initiated on the basis of quantum order cannot survive - the penalty imposed under this issue is hereby order to be set aside - Merely because the claim of the assessee has not been allowed by the authorities, it cannot be said that the assessee has concealed his particulars of income or has furnished inaccurate particulars of income in this respect - Hence the penalty levied by the A.O. and upheld by the learned CIT(A) for disallowance of provision for cash discount is deleted. Disallowance of provision for Executive Retirement Scheme Held that - The matter has been restored to the file of A.O. for deciding the issue afresh in the light of section 35DDA of the Act - the addition made by the A.O. and confirmed by the learned CIT(A) has already been set aside by the Tribunal and the matter has been restored to the file of A.O. for fresh adjudication, the very basis for levy of penalty has ceased to exist - the penalty imposed under the above head is ordered to be deleted. Disallowance for provision of bonus u/s 43B of the Act Held that - The decision in Commissioner of Income Tax Vs. Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT followed - 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, attract the penalty under section 271(1)(c) - if the view forwarded by the assessee can also be one of the possible views, then under such circumstances, even, if the assessee s view did not go well with the authorities or because the assessee did not press the issue in the quantum appeal, that itself cannot be a ground for levy of penalty - In view of our observation above, the penalty imposed is set aside. Disallowance of deduction u/s 80-IB of the Act Held that - The levy of penalty for the matter in respect of which the disallowance has been upheld by the Tribunal - the matter which has been restored back to the file of A.O. for deciding the issue afresh, the very basis for the penalty has ceased exist - it is left to the AO to decide whether the penalty proceedings are to be initiated in view of the fresh assessment order pertaining to the matter in question Decided partly in favour of Revenue.

Summary

Issues:
Penalty levied under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 2001-2002.

Analysis:

1. Disallowance u/s 145A:
The Tribunal remitted the matter to the AO for reworking the disallowance as per directions given for the previous year. As the quantum order was set aside and remitted back, the penalty proceedings based on the quantum order were deemed unsustainable. The penalty under this issue was set aside, allowing the AO to initiate fresh penalty proceedings if necessary after reworking the disallowance.

2. Disallowance of reserve for cash discount:
The Tribunal directed the AO to allow the reserve for cash discount on actual payment basis, contrary to the adhoc provision by the assessee. Despite the disallowance, the issue was debatable, indicating no concealment or furnishing of inaccurate particulars by the assessee. The penalty for this disallowance was ordered to be deleted.

3. Disallowance of provision for Executive Retirement Scheme:
The Tribunal restored the matter to the AO for fresh adjudication in light of section 35DDA, nullifying the basis for penalty imposition. The penalty under this head was deleted, allowing the AO to initiate fresh penalty proceedings post fresh assessment if deemed necessary.

4. Disallowance for provision of bonus u/s 43B:
The AR argued that the bonus provision was contractual, not statutory, citing relevant case law. The Tribunal's decision to set aside the issue in quantum appeal did not warrant penalty imposition, following the principle that a genuine explanation by the assessee, even if not accepted, does not automatically attract penalty. The penalty under this issue was set aside.

5. Disallowance u/s 40A(2)(b) of the Act:
Since the Tribunal already deleted the disallowance, the basis for penalty imposition ceased to exist, leading to the deletion of the penalty under this head.

6. Disallowance of deduction u/s 80-IB of the Act:
The Tribunal partly upheld the disallowance under this issue but restored certain items for fresh consideration. The penalty was upheld for matters where disallowance was confirmed by the Tribunal. For matters remitted back for fresh adjudication, the penalty was left to the AO's discretion post fresh assessment. The appeal of the assessee was partly allowed, and that of the Revenue was dismissed.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the Tribunal's decisions, and the rationale behind the penalty imposition or deletion for each specific issue under consideration.