2015 (9) TMI 601 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of expenses written off u/s 35D - Held that - Admittedly and undisputedly, the claim of preliminary expenses was allowed by the AO in five equal instalments starting from AY 2009-10 which also shows that 1/5th part of the claim of the assessee has been allowed by the AO during the year under consideration and remaining part has also been allowed by the AO in four equal instalments in the subsequent assessment years. Now, under above noted facts and circumstances, it is vivid that the claim of the assessee was not allowed in the first year viz. AY 2009-10 and the same was allowed in five AYs starting from the assessment year under consideration. Hence, in this situation, we of the considered view that the case of the assessee is squarely covered in favour of the assessee by the judgement of Hon ble Supreme Court in the case of CIT vs Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT and judgement CIT vs Brahmputra Consortium Ltd. 2011 (8) TMI 8 - DELHI HIGH COURT wherein dismissing the respective appeals of the revenue, it was held that the AO did not contradict the plea of the assessee that excess claim was an inadvertent error and the excess claim was not advantageous to the assessee, therefore, deletion of penalty was held as justified. It is clear that the mere making of a claim which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to furnishing of inaccurate particulars. - Decided in favour of assessee.

Summary

Issues:
Penalty u/s 271(1)(c) of the Income Tax Act, 1961 - Confirming the penalty on the assessee for concealment of income or furnishing inaccurate particulars of income.

Analysis:
1. The appeal challenged the order of CIT(A) upholding the penalty under section 271(1)(c) of the Income Tax Act, 1961. The crux of the case was the contention by the assessee that there was no concealment of income or furnishing of inaccurate particulars of income, thus the penalty was unjustified.

2. The assessee claimed that the explanation provided was bonafide and correct, citing compliance with Accounting Standard 26 (AS 26) for writing off preliminary expenses. The appellant argued that the claim was allowable under Income Tax provisions and was subject to specific provisions, thus penalty imposition was unwarranted.

3. The appellant highlighted that the preliminary expenses were written off in accordance with AS 26 and that the tax auditors did not raise any concerns regarding the claim under section 35D. The appellant argued against the penalty, stating that the case laws relied upon by CIT(A) were distinguishable and the penalty should be deleted.

4. The AO imposed the penalty based on the disallowance of expenses written off under section 35D. However, the claim of the assessee was not found incorrect or bogus, as it was allowed in five equal installments. The appellant contended that the penalty was not sustainable and referenced relevant judgments to support their case.

5. The Tribunal analyzed the submissions of both sides and reviewed the material on record. It noted that the claim of preliminary expenses was allowed in installments, indicating that the claim was not entirely disallowed. The Tribunal found that the claim was not incorrect or bogus, aligning with the judgments of the Supreme Court and High Court, leading to the deletion of the penalty.

6. Citing the judgment in the case of CIT vs Reliance Petroproducts Pvt. Ltd., the Tribunal emphasized that making a claim not accepted by the AO does not automatically attract penalty under section 271(1)(c). The Tribunal concluded that the penalty was not imposable on the assessee in this case, directing the AO to delete the penalty.

This detailed analysis of the judgment showcases the legal arguments, interpretations of relevant provisions, and application of precedents that led to the decision to delete the penalty imposed on the assessee.