2016 (9) TMI 459 - AT - Income Tax

Penalty imposed u/s.271(1)(c) - exclusion of interest income and miscellaneous income for the purpose of deduction u/s.80IA - Held that - CIT(A) has held that the amounts representing interest and miscellaneous income for which assessee has claimed deduction u/s.80IA but was not granted by the A.O., would not be considered as furnishing of inaccurate particulars or concealment of income. As far as the other two items are concerned i.e. Duty Draw Back and sale proceeds of DEPB license are concerned, we find that assessee has filed the return of income on 01.02.2002. There was a controversy, whether the income resulting on transfer of duty draw back or DEPB license would be considered as derived from industrial undertaking. This controversy has been resolved finally by the Hon ble Supreme Court on 31.08.2009 in the case of Liberty India Ltd. V. CIT (2009 (8) TMI 63 - SUPREME COURT ). When assessee has filed the return, this decision was not in picture. The decision of Hon ble Gujarat High Court in the case of India Gelatine & Chemicals Ltd., reported in (2004 (4) TMI 20 - GUJARAT High Court ) was in favour of the assessee. Therefore, at that time, it was a quite debatable issue. The ld. CIT(A) has observed that in view of the decision of Hon ble Supreme Court in the case of Pandian Chemicals Ltd. v CIT (2003 (4) TMI 3 - SUPREME Court ) or in the case of CIT v. Sterling Foods (1999 (4) TMI 1 - SUPREME Court) assessee ought to have not made this claim is concerned that inspite of these decisions, the deduction was granted to the assessee. Therefore, in our opinion, before the decision of Liberty India Ltd. V. CIT(A) (supra), it was a debatable issue and for inclusion of these amounts for the purpose of claiming deduction u/s.80IA, assessee cannot be held guilty of concealing the particulars of income. We delete the penalty with regard to disallowance made in the claim of deduction u/s.80IA of the Act. As far as the deduction claimed u/s.80HHC is concerned, it emerges out that against the original disallowance the issue travelled up to the Tribunal. The Tribunal has set aside the matter to the Assessing Officer. In the fresh assessment order, ld. A.O. has not initiated penalty proceedings against the assessee u/s.271(1)(c) of the Act. The A.O. has nowhere in the assessment order observed that the penalty proceedings against the assessee would be taken up. Therefore, no penalty can be imposed upon the assessee on this issue. In view of above, no penalty is sustainable upon the issue. We allow the appeal of the assessee and delete the penalty alleged to have been confirmed by the ld. CIT(A) - Decided in favour of assessee

Summary

Issues:
- Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act for A.Y. 2001-02.

Analysis:
1. The assessee appealed against the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2001-02. The primary contention was regarding the confirmation of the penalty by the ld. CIT(A) in the original order dated 17.06.2011.

2. The case background revealed that the initial return of income declared by the assessee was &8377; 1,16,780/-. However, the subsequent assessment order passed under section 143(3) of the Income Tax Act determined the total income at &8377; 59,34,440/-. The penalty proceedings were initiated by the Assessing Officer based on discrepancies in deductions claimed under sections 80IA and 80HHC of the Act.

3. The ld. CIT(A) partly allowed the appeal of the assessee, addressing specific components of the deductions claimed. The Tribunal's intervention led to the restoration of the issues back to the ld. CIT(A) for further review, allowing the assessee an opportunity to rectify the defects within a specified timeframe.

4. During the proceedings, the Assessing Officer had imposed the penalty primarily due to disallowances in deductions claimed under sections 80IA and 80HHC. The ld. CIT(A) examined these disallowances in detail. The ld. CIT(A) upheld the penalty related to the claim under section 80IA for certain items but found the claim under section 80HHC to be debatable.

5. The Tribunal's scrutiny of the deduction claimed under section 80HHC revealed that the Assessing Officer had not initiated penalty proceedings in the fresh assessment order. As a result, the Tribunal concluded that no penalty could be imposed on the assessee for this specific issue.

6. Ultimately, the Tribunal allowed the appeal of the assessee and deleted the penalty of &8377; 13,50,559/- imposed under section 271(1)(c) of the Income Tax Act. The decision was based on the specific findings related to the deductions claimed under sections 80IA and 80HHC, emphasizing the debatable nature of certain claims and the lack of penalty initiation in the fresh assessment order.

7. In conclusion, the Tribunal's order pronounced on 10/02/2016 favored the assessee by allowing the appeal and nullifying the penalty imposed, providing a detailed analysis of the issues involved in the penalty proceedings under section 271(1)(c) for the assessment year 2001-02.