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2017 (6) TMI 543 - AT - Income TaxPenalty u/s 271(1)(c) - addition made u/s 35DDA - Held that - On perusal of the order of the coordinate bench it is apparent that the claim of the assessee was based on several decisions including the decision of Hon ble Delhi High Court in CIT Vs. KJS India Pvt. Ltd (2011 (9) TMI 667 - Delhi High Court) and coordinate bench has also discussed the claim of the assessee thoroughly. Merely because the claim of the assessee was not accepted by the concurrent authority despite there being plausible judicial precedents in favour of the assessee, the claim of the assessee cannot be said to be false. It is also an established principle that penalty u/s 271(1)(c) of the Act cannot be levied on debatable issues. Hon ble Supreme Court in case of CIT Vs. Reliance Petro Products Pvt. Ltd 2010 (3) TMI 80 - SUPREME COURT has held that merely on the ground that the claim of the assessee is incorrect cannot tantamount to furnishing of incorrect claims. - Decided in favour of assessee.
Issues Involved:
1. Deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act. 2. Applicability of Section 35DDA versus Section 37(1) for Voluntary Retirement Scheme (VRS) expenditure. 3. Assessment of whether the claim was false or debatable. 4. Consideration of judicial precedents and principles regarding penalty imposition. Issue-wise Detailed Analysis: 1. Deletion of Penalty Imposed under Section 271(1)(c) of the Income Tax Act: The appeal by the Revenue challenged the deletion of a penalty of ?18,810,897 levied under Section 271(1)(c) of the Income Tax Act by the CIT(A). The penalty was originally imposed by the Assessing Officer (AO) on the grounds that the assessee had furnished inaccurate particulars of income by claiming the entire VRS expenditure in one year instead of spreading it over five years as mandated by Section 35DDA. 2. Applicability of Section 35DDA versus Section 37(1) for Voluntary Retirement Scheme (VRS) Expenditure: The core issue revolved around whether the VRS expenditure should be claimed under Section 35DDA, which allows for the deduction of such expenses in five equal installments, or under Section 37(1), which would allow the entire expenditure in the year it was incurred. The AO disallowed 80% of the VRS expenditure claimed by the assessee under Section 37(1), allowing only 20% as per Section 35DDA. This disallowance was upheld by the CIT(A) and subsequently by the ITAT. 3. Assessment of Whether the Claim was False or Debatable: The ITAT noted that the assessee's claim was supported by various judicial decisions, including a decision by the Hon'ble Delhi High Court. The ITAT emphasized that merely because the claim was not accepted by the tax authorities, it did not render the claim false. The ITAT referenced the Supreme Court's decision in CIT vs. Reliance Petro Products Pvt. Ltd., which held that an incorrect claim does not amount to furnishing inaccurate particulars of income. The ITAT further observed that penalty under Section 271(1)(c) cannot be levied on debatable issues. 4. Consideration of Judicial Precedents and Principles Regarding Penalty Imposition: The ITAT referred to several judicial precedents, including the Delhi High Court's decision in CIT vs. Dalmia Pvt Ltd, which held that penalties under Section 271(1)(c) are not justified when the issue is debatable and the claim is bona fide. The ITAT also noted that the assessee had made a full disclosure of the claim and had relied on judicial precedents, which indicated a bona fide belief in the correctness of the claim. Conclusion: The ITAT concluded that the claim of the assessee, although not accepted, was based on plausible judicial precedents and was not false. The ITAT upheld the CIT(A)'s decision to delete the penalty, finding no infirmity in the order. The appeal by the Revenue was dismissed, and the order was pronounced in the open court on 09/06/2017.
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