2015 (10) TMI 183 - AT - Income Tax

Penalty imposed u/s 271(1)( c) r/w section 274 - disallowing excess and incorrect deduction u/s 80IA on account of profit from trading of VSAT equipment , service charges for computer software updating of NMS, FDRs pledged with Bank for availing non fund based working capital limits treating it as income from other sources and profit earned from segment charges - CIT(A) deleted penalty levy - Held that - The issue of penalty is consequential to the disallowance/addition made in the quantum proceedings. As per facts submitted by the assessee and fairly accepted by the ld. DR, we observe that all four issues have not attained finality and these are pending before the AO and the Tribunal for a fresh adjudication as per order of Hon ble High Court dated 17.5.2012 and order of the Tribunal dated 31.3.2010. Therefore, we find it appropriate to restore the issue of penalty for a fresh adjudication to the file of AO with the direction that the AO shall decide the penalty proceedings after affording due opportunity of hearing for the assessee and keeping in view the outcome of quantum proceedings orders by respective quasi-judicial and judicial forums and without being prejudiced from the earlier penalty and impugned appellate orders. - Decided in favour of revenue for statistical purposes

Summary

Issues:
1. CIT(A) cancelling penalty imposed by AO under section 271(1)(c) of the Income Tax Act, 1961.
2. Whether making a claim not sustainable in law amounts to furnishing inaccurate particulars of income.

Analysis:

Issue 1:
The appeal was against the CIT(A)'s order cancelling the penalty imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961. The AO had imposed a penalty of Rs. 68,56,155 on the assessee for claiming excess and incorrect deductions under section 80IA of the Act. The revenue contended that the assessee furnished inaccurate particulars of income and concealed important details, justifying the penalty. However, the counsel of the assessee argued that the issues were debatable and controversial as various forums had given relief on different counts. The ITAT decided to restore the issue of penalty to the AO for a fresh adjudication, considering that all four issues were pending before different authorities for further examination.

Issue 2:
The second issue revolved around whether making a claim not sustainable in law amounts to furnishing inaccurate particulars of income. The counsel of the assessee argued that the claim for deductions was debatable, as relief had been granted on some issues by the CIT(A) and the Tribunal. They cited the decision of the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd., emphasizing that not every disallowance automatically attracts a penalty under section 271(1)(c) of the Act. The ITAT considered the pending nature of the issues and the lack of finality in the quantum proceedings, deciding to set aside the penalty for a fresh adjudication by the AO based on the outcomes of the respective judicial authorities.

In conclusion, the ITAT deemed the appeal of the revenue to be allowed for statistical purposes, directing the AO to decide the penalty proceedings after considering the outcomes of the quantum proceedings and without prejudice from previous penalty and appellate orders.