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2015 (5) TMI 41 - AT - Income TaxPenalty u/s 271(1)(c) of Income Tax Act, 1961 - Concealment of particulars of income or furnished inaccurate particulars of income - Claim of non-allowable expenses - Held that - We have noted that so far as disallowance of long-term capital loss is concerned, the only basis for the said disallowance is an Inspector s report, but then the Inspector s report, prima facie, by itself cannot be a reason enough to disregard the sale consideration on the basis of documents on record. While we refrain from making any observation on merits, it is sufficient to say that by no stretch of logic this Inspector s report can be reasonably and legally sustainable foundation for holding that the assessee concealed any particulars of income or furnished inaccurate particulars of income. Whatever sale consideration has been stated by the assessee is admittedly supported by the sale deed etc. and the Assessing Officer has not even called the same into question. In these circumstances the learned CIT(A) was quite justified in deleting the impugned penalty so far as long term capital loss is concerned. As regards the disallowance of expenditure in respect of car hire charges, it is an undisputed position that the assessee did produce Memorandum of Understanding in support of the claim of expenditure but then the Assessing Officer was swayed by other considerations such as non deduction of tax at source which was wholly irrelevant so far as assessment year 2004-05 was concerned since the provisions of section 40(a)(ia) has been brought to statute w.e.f. 1st April, 2005. Therefore, whether the tax was deducted at source while making payments of car hire charges or not, prima facie, could not have any legally sustainable implications in the disallowance with respect to the expenditure in question. Even on this issue as we refrain from making any observation on merits, we are clearly of the view that the facts on record did not justify or warrant imposition of penalty in respect of this quantum disallowance. Finally as regards the partial disallowance of depreciation on software, it is an undisputed position that all the relevant facts were before the Assessing Officer and incorrectness of the claim, even if that be so, cannot by itself lead to or result in imposition of penalty u/s. 271(1)(c). In view of these observations and also bearing in mind entirety of the case, we are not inclined to disturb the well reasoned findings of the CIT(A). We confirm the same and decline to interfere in the matter. - Decided against the revenue.
Issues Involved:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Furnishing inaccurate particulars of income. 3. Concealment of taxable income by claiming non-allowable expenses. Issue-wise Detailed Analysis: 1. Deletion of Penalty under Section 271(1)(c): The Assessing Officer (AO) challenged the correctness of the CIT(A)'s order, which deleted the penalty of Rs. 8,30,865/- imposed under section 271(1)(c) for the assessment year 2004-05. The AO argued that the assessee furnished inaccurate particulars of income and concealed taxable income by claiming non-allowable expenses such as loss on sale of a plot, car hire charges, and excessive depreciation on software. 2. Furnishing Inaccurate Particulars of Income: During assessment proceedings, the AO noted that the assessee sold a plot for Rs. 14,00,000/- against a purchase price of Rs. 28.38 lacs. The assessee explained the sale was due to the need to comply with UPSIDC guidelines and the decision to set up the project in Dehradun instead. The AO rejected this explanation based on an Inspector's report suggesting a higher market price, leading to the disallowance of the capital loss. Additionally, the AO disallowed car hire charges and depreciation on software due to lack of supporting documents and usage duration, respectively. The AO imposed a penalty for concealment and furnishing inaccurate particulars. 3. Concealment of Taxable Income by Claiming Non-Allowable Expenses: The CIT(A) deleted the penalty, observing that penalty proceedings are distinct from assessment proceedings and that findings in assessment proceedings are not conclusive. The CIT(A) emphasized that the burden of proof lies on the assessee to establish the presumption of bona fide explanations, which can be discharged by direct or circumstantial evidence. The CIT(A) also noted that mere disallowance of expenses does not automatically justify penalty imposition unless there is conscious concealment or furnishing of inaccurate particulars. The CIT(A) concluded that the assessee's conduct and explanations did not indicate any intentional act of concealment or furnishing inaccurate particulars. Appellate Tribunal's Observations: The Tribunal upheld the CIT(A)'s decision, noting that the Inspector's report alone was insufficient to disregard the sale consideration supported by sale deeds. The Tribunal found no basis for penalty imposition regarding the long-term capital loss, car hire charges, or depreciation disallowance. The Tribunal emphasized that incorrect claims, if bona fide, do not warrant penalty under section 271(1)(c). Conclusion: The Tribunal confirmed the CIT(A)'s findings, concluding that there was no case of concealment or furnishing inaccurate particulars by the assessee. The appeal by the AO was dismissed, and the penalty under section 271(1)(c) was canceled. Order Pronounced: The order was pronounced in the open court on 27th March, 2015.
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