2014 (4) TMI 310 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Act Held that - The penalty order deserves to be quashed - Simply because the additions made were not challenged by the assessee this fact by itself is not a good enough reason to confirm or impose penalty - There can be many reasons which may prevail on the mind of an assessee on account of which the assessee may not challenge the additions in a certain year - The mere fact of accepting the additions ipso facto does not lead to the conclusion that the assessee has nothing to say - it is a matter of record that the assessee has been crying hoarse right for the penalty proceedings itself that on merits had the assessee chosen to agitate the claim of higher depreciation the claim would have been allowed there was no reason as to why the explanation was not considered by the authority. Addition made u/s 14A of the Act Excess depreciation claimed Held that - The assessee has contended that there was full disclosure and it is only a case that disallowance made by the assessee was found to be inadequate which issue had the assessee chosen to challenge may have resulted in relief - The explanation too warranted a consideration - quantum proceedings and penalty proceedings are separate and distinct - The explanation offered in the penalty proceedings necessarily has to be considered judiciously within the Statutory framework - Relying upon COMMISSIONER OF INCOME TAX Versus BSES YAMUNA POWERS LLD. / BSES RAJDHANI POWERS LTD. 2010 (8) TMI 58 - DELHI HIGH COURT the order and the penalty proceedings set aside Decided in favour of Assessee.

Summary

Issues:
1. Penalty imposition under section 271(1)(c) for income discrepancies.

Analysis:

Issue 1 - Penalty imposition under section 271(1)(c) for income discrepancies:
The case involved an appeal against the order of the CIT(A) upholding the penalty imposed under section 271(1)(c) for discrepancies in income declared by the assessee. The additions made by the Assessing Officer (AO) were not challenged in the quantum proceedings. The penalty was imposed despite the assessee's explanation that the discrepancies were due to a difference of opinion and reliance on case laws. The First Appellate Authority upheld the penalty, emphasizing that since the additions were accepted by the assessee without challenge, the penalty was justified. However, the Tribunal disagreed with this reasoning. The Tribunal noted that accepting additions in the assessment does not automatically warrant a penalty, as there could be various reasons for not challenging the additions. The Tribunal highlighted that the assessee had consistently argued that if the issues were challenged, relief could have been obtained. The Tribunal emphasized the distinction between quantum and penalty proceedings, stating that the explanation provided by the assessee should have been considered within the statutory framework. Ultimately, the Tribunal set aside the penalty order, concluding that the assessee's explanation deserved acceptance, especially considering the jurisdictional High Court's consistent views. The Tribunal found no grounds for penal action and quashed the penalty order, allowing the appeal of the assessee.

This detailed analysis of the judgment highlights the legal arguments, reasoning, and conclusions drawn by the Tribunal in the case concerning the imposition of a penalty under section 271(1)(c) for discrepancies in income declared by the assessee.