2017 (5) TMI 257 - HC - Income Tax

Penalty levied under section 271(1)(c) - claim of weighted deduction on purchase of the motor vehicles for employees - Held that - As observed by the Hon ble Supreme Court as well as this Court in catena of decisions, mere wrong claim cannot be a ground to levy penalty under section 271(1) (c) of the Act. Under the circumstances and considering the decision of the Hon ble Supreme Court in the case of Tips Industries P. Ltd. (2010 (1) TMI 50 - BOMBAY HIGH COURT ) when the learned tribunal has deleted penalty under section 271(1)(c) of the Act, it cannot be said that the learned tribunal has committed any error. No substantial question of law arise. - Decided in favour of assessee

Summary

Issues:
- Appeal against the order of the Income Tax Appellate Tribunal dismissing the penalty under section 271(1)(c) of the Income Tax Act.

Analysis:
The appellant challenged the order of the Income Tax Appellate Tribunal (ITAT) which dismissed the penalty under section 271(1)(c) of the Income Tax Act. The appellant claimed weighted deduction on the purchase of motor vehicles for employees in the assessment for the year 2005-06. The Assessing Officer (A.O.) made various additions during the scrutiny assessment, including expenditure capitalized, disallowance of garden expenses, disallowance of R&D expenditure, and disallowance under section 14A of the Act. The matter was taken to the ITAT, which deleted some additions but upheld an addition of ?82,99,000 claimed by the assessee as a weighted deduction on the purchase of motor vehicles for employees. The A.O. imposed a penalty under section 271(1)(c) on this addition, which was later deleted by the Commissioner of Income Tax (CIT-A). The ITAT, relying on the decision of the Supreme Court in a specific case, upheld the deletion of the penalty under section 271(1)(c).

The High Court considered the arguments presented by the appellant's counsel and reviewed the orders of the A.O., CIT-A, and ITAT. It was noted that while the assessee lost the claim of ?82,99,000 up to the ITAT, the mere fact of a wrong claim does not automatically warrant the imposition of a penalty under section 271(1)(c) of the Act. The High Court referred to previous decisions, including that of the Supreme Court, emphasizing that a wrong claim alone is not sufficient for penalty imposition. Given the precedent set by the Supreme Court and the consistent legal interpretation, the High Court concluded that the ITAT did not err in deleting the penalty under section 271(1)(c) of the Act. No substantial question of law arose from the case, leading to the dismissal of the appeal by the High Court.