2017 (6) TMI 395 - AT - Income Tax

Penalty u/s.271(1)(d) - non-inclusion of certain expenditure for the purpose of FBT liability - Held that - The assessee has come out with complete disclosure of disputed items of expenditure not included for the purpose of determination of fringe benefits tax liability in the return of income. Thus, the bonafides of the action of the assessee cannot be tainted with any doubt. We also note the attendant fact that the assessee has ear-marked the quantum of fringe benefit tax in the separate escrow account pending resolution of the controversy. Thus, there are sufficient indicators existing in the case that the assessee has acted on bonafide considerations. Needless to say a finding in the quantum proceedings that a particular expenditure is susceptible to provisions of FBT cannot automatically be adopted for the purposes of s.271(1)(d). The assessee has successfully discharged the initial onus placed on it for rebut5ting presumption against it. Therefore, we are unable to see any error in the action of the CIT(A) in deleting the penalty imposed by the AO under s.271(1)(d) of the Act. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty under section 271(1)(d) of the Income Tax Act for non-inclusion of certain expenditure for the purpose of Fringe Benefit Tax liability.

Analysis:

Issue 1: Imposition of Penalty under Section 271(1)(d)
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) granting relief against the penalty of ?2.84 crores imposed by the Assessing Officer under section 271(1)(d) of the Income Tax Act for the Assessment Year 2006-07. The grounds of appeal by the Revenue highlighted that the CIT(A) erred in law by deleting the penalty despite the quantum addition being confirmed. The Appellate Tribunal noted that the short issue for consideration was the correctness of imposing the penalty for non-inclusion of certain expenditure for Fringe Benefit Tax liability as per section 115WB of the Act.

Issue 1 Analysis:
The CIT(A) observed that the AO imposed the penalty based on the addition made to the fringe benefit and confirmed by the CIT(Appeals). However, the appellant had disclosed in the return that the disputed expenditure was not incurred on employees and thus not subject to fringe benefit tax. The CIT(A) referred to relevant case laws and held that mere rejection of the claim does not attract penal provisions. The Tribunal agreed that the appellant made full disclosure of the disputed expenditure and acted in good faith by earmarking the fringe benefit tax amount in a separate account. The Tribunal found no error in the CIT(A)'s decision to delete the penalty imposed by the AO under section 271(1)(d) of the Act.

Conclusion:
The Appellate Tribunal dismissed the Revenue's appeal, upholding the decision of the CIT(A) to delete the penalty imposed under section 271(1)(d) of the Income Tax Act. The Tribunal emphasized the importance of full disclosure and good faith actions by the appellant in dealing with the disputed expenditure for Fringe Benefit Tax liability.