2014 (4) TMI 628 - AT - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Bonafide for claiming deductions proved - Held that - A fraud/defalcation has been committed by one of the employees of the assessee which came to the notice of the assessee in 2005 - the return of income along with Tax audit report were filed much earlier to the date of detection of defalcation - the assessee could not produce bills and vouchers because the same has been destroyed by the employee of the assessee - The facts clearly show that the claim of expenditure was bonafide at the time of filing of the return of income - Merely because of subsequent events, the assessee could not produce bills/vouchers to substantiate its claim of expenditure cannot ipso facto lead to the conclusion that the assessee has filed inaccurate particulars - the decision in Commissioner of Income-tax Versus M/s. Universal Medicare Pvt. Ltd. 2014 (1) TMI 1261 - ITAT MUMBAI followed also in, COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT - There is a distinction between wrong claim and false claim - Considering the entire factual matrix, it cannot be said that assessee had made false claim Decided against Revenue.

Summary

Issues:
- Appeal against deletion of penalty u/s. 271(1)(c) of the Act for A.Yrs. 2003-04 and 2004-05.

Analysis:
- The Revenue filed appeals against the deletion of penalties for both years, presenting a common issue.
- The AO levied penalties based on disallowances made during assessments.
- The assessee argued its bonafide intentions and efforts to substantiate claims.
- The AO imposed penalties citing failure to substantiate claims and special audit findings.
- The CIT(A) considered the circumstances, including a fraud by an employee affecting evidence availability.
- The CIT(A) noted the assessee's efforts to collect evidence and the ongoing investigation into the fraud.
- CIT(A) observed that the assessee's claims were made in good faith, supported by prior audits and circumstances.
- The CIT(A) compared the case with similar group company situations where penalties were canceled.
- The Tribunal upheld the CIT(A)'s decision, citing lack of false claims and reliance on Supreme Court precedents.
- The Tribunal dismissed Revenue's appeals, finding no distinguishing facts and following previous decisions.
- The Tribunal distinguished a cited Delhi High Court case, favoring the Supreme Court's decision in Reliance Petro Products.

This detailed analysis covers the issues raised in the appeals against the deletion of penalties under section 271(1)(c) for the assessment years 2003-04 and 2004-05. The judgment highlights the arguments presented by both parties, the considerations of the assessing officer and CIT(A), and the Tribunal's decision based on the facts and legal precedents.