2014 (10) TMI 579 - HC - Income Tax

Imposition of penalty u/s 271(1)(c) Various additions made by AO - Held that - The first addition made by the AO pertains to ad hoc disallowance out of various expenses debited in the P&L account - This disallowance has been made by the AO on the ground that in the immediately preceding year, the ratio of the expenses qua the total receipts is on the lower side in terms of percentage - This year, it has been increased and assessee failed to show the reasons for such an increase - it is an ad hoc disallowance AO has not pointed out that which particular submitted by the assessee is inaccurate - Therefore, no penalty can be imposed for this addition. Disallowance of bad debts Held that - The reasons for making the disallowance is that assessee failed to furnish the basis of identifying the debt as bad and from which date it has become bad. W.e.f. 01.04.1989, the assessee is not supposed to demonstrate the fact that debt has become bad - Its allowance can be made only on the ground that such debt has been written off in the books - there is nothing in the assessment order which can justify the imposition of penalty - AO has not pointed out which particular pertaining to bad debt is incorrect. Ad hoc disallowance out of training and recruitment expenses - disallowance out of claim of depreciation Held that - The assessee has claimed the depreciation on computer peripheral @ 60%, - relying upon Income-tax Officer, Ward-31(4), Kolkatta. Versus Samiran Majumdar 2005 (8) TMI 293 - ITAT CALCUTTA-B - depreciation on printer etc. would be admissible @ 60% - there cannot be any disallowance, the AO did not point out which particular submitted by the assessee is incorrect - The Tribunal has enquired into each of the four heads in which additions were made, examined the nature and character of the addition and the explanation offered by the assessee and whether this would satisfy the needs and requirements of the Explanation No.1 - assessee has been able to discharge the onus in respect of each addition - The claim of the assessee in the return was bona fide and it cannot be that full and true particulars and details were not submitted before the AO thus, the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Imposition of penalty for concealment under Section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:
The High Court judgment pertains to an appeal by the appellant-Revenue against the order of the Income Tax Appellate Tribunal affirming the decision of the Commissioner of Income Tax (Appeals) that the penalty imposed for concealment under Section 271(1)(c) of the Income Tax Act was not justified. The respondent-assessee had filed a return of income for the Assessment Year 2008-09, declaring a loss which was later reduced after additions made by the Assessing Officer. The Tribunal examined the scope of Section 271(1)(c) and emphasized the conditions for imposing a penalty, including concealment of income or furnishing inaccurate particulars. The section allows a penalty ranging from 100% to 300% of the tax sought to be evaded. The Tribunal elucidated the deeming provisions regarding concealment of income, emphasizing situations where the assessee fails to offer a genuine explanation or substantiate it, leading to the deeming fiction coming into play.

The Tribunal delved into the specific additions made by the Assessing Officer, such as disproportionate expenses, bad debts, recruitment and training expenses, and excess claim of depreciation on computer peripherals. It was noted that the Assessing Officer had not pinpointed inaccuracies in the submissions of the assessee regarding these additions, leading to a conclusion that no penalty could be imposed. The Tribunal found that the explanations provided by the assessee were bona fide and that the onus to establish the same had been discharged. In the case of bad debts and depreciation on computer peripherals, legal provisions and precedents were cited to support the assessee's claims. The Tribunal ultimately upheld the decision of the Commissioner of Income Tax (Appeals) to delete the penalty, dismissing the appeal of the revenue.

The High Court concurred with the Tribunal's analysis, emphasizing that the respondent-assessee had successfully demonstrated the legitimacy of the additions made by the Assessing Officer. It was noted that the explanations provided were genuine, and there was no evidence of deliberate concealment or furnishing of inaccurate particulars. The Court agreed that no substantial question of law arose for consideration and upheld the dismissal of the appeal.