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2017 (12) TMI 1522 - AT - Income TaxPenalty proceedings u/s 271(1)(c) - disallowance of depreciation on the amount of entertainment subsidy and disallowed on account of ESOP expenditure - Held that - As far as penalty on addition in respect of entertainment subsidy is concerned, the ITAT has deleted the entire quantum in the quantum appeal and thus, we agree with the Ld. CIT(A) that no penalty is leviable on the same as quantum addition itself has been deleted. Disallowance on account of ESOP expenditure - Held that - It is undisputed that accounts of the assessee were duly audited, tax audit report, computation of income and income tax return were not at variance and relevant details were filed by the assessee during the course of assessment proceedings against which the Assessing Officer has not made any adverse observation. It is also undisputed that the amount of expenditure claimed on ESOP was duly reflected in the P&L account and also in the notes to accounts. Therefore, we are of the considered opinion that penalty will not be leviable on this issue as mere making of a claim, which is not otherwise acceptable in law, will not tantamount to concealment of income or furnishing inaccurate particulars, especially when the bona fides of the assessee are not under doubt. - Decided in favour of assessee.
Issues:
1. Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. 2. Disallowance of entertainment subsidy as capital receipt. 3. Disallowance of ESOP and ESPS schemes as contingent liability. 4. Disallowance under section 14A of the Act. 5. Applicability of penalty on disallowed amounts. Issue 1 - Deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961: The case involved an appeal by the revenue against the deletion of a penalty imposed under section 271(1)(c) by the Ld. CIT (A) for assessment year 2006-07. The Ld. CIT (A) deleted the penalty based on the ITAT's decision that the entertainment subsidy was a capital receipt and the debatable nature of the ESOP expenditure issue. The ITAT held that no penalty was leviable on the entertainment subsidy as the quantum addition had been deleted. Regarding the ESOP expenditure, the ITAT found that the issue was debatable, the assessee had provided all necessary information during assessment, and no concealment or inaccurate particulars were proven. The ITAT upheld the Ld. CIT (A)'s decision to delete the penalty. Issue 2 - Disallowance of entertainment subsidy as capital receipt: Initially, the Assessing Officer disallowed the entertainment subsidy claimed as a capital receipt. On appeal, the Ld. CIT (A) enhanced the income by treating the subsidy as a revenue receipt. However, the ITAT later ruled that the subsidy was indeed a capital receipt, leading to the deletion of the penalty related to this amount. Issue 3 - Disallowance of ESOP and ESPS schemes as contingent liability: The Assessing Officer disallowed a significant amount related to ESOP and ESPS schemes as a contingent liability. The Ld. CIT (A) confirmed this disallowance. However, the ITAT found that the ESOP expenditure issue was debatable, with conflicting views from different ITAT benches. As the assessee had provided all relevant details during assessment and no concealment was proven, the penalty on this disallowed amount was deleted. Issue 4 - Disallowance under section 14A of the Act: A disallowance under section 14A was confirmed by the Ld. CIT (A) initially. However, the ITAT set aside this disallowance to the file of the Assessing Officer. This issue did not directly impact the penalty decision. Issue 5 - Applicability of penalty on disallowed amounts: The ITAT concluded that penalties were not leviable on the disallowed amounts due to the debatable nature of the issues, the absence of concealment or inaccurate particulars, and the assessee's cooperation during assessment. Citing legal precedents, the ITAT upheld the Ld. CIT (A)'s decision to delete the penalty. The appeal by the revenue was ultimately dismissed. This detailed analysis of the judgment highlights the key issues, decisions made by the authorities, and the legal reasoning behind the deletion of the penalty in this tax matter.
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