2018 (12) TMI 1590 - AT - Income Tax

Penalty levied u/s 271(1)(c) - disallowance of pre-operative expenses - Held that - In the case of Reliance Petroproducts (P.) Ltd. 2010 (3) TMI 80 - SUPREME COURT it is held that merely because the assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty under section 271(1)(c) of the Act. In the instant case, as mentioned earlier at para 7, the assessee has disclosed the facts. There is no dispute about it. It has been delineated by the AO in para 5.1, 5.2, 5.3 and 5.4 in the assessment order dated 14.03.2015. The only issue is the treatment given by the AO to the claim of the assessee. We are of the considered view that the ratio laid down in Reliance Petroproducts (P.) Ltd. (supra) squarely applies to the present case. Following the above decision, we uphold the order of the Ld. CIT(A). - decided against revenue

Summary

Issues Involved:
Appeal against penalty u/s 271(1)(c) of the Income Tax Act 1961 for assessment year 2012-13.

Detailed Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) regarding the penalty levied u/s 271(1)(c) of the Income Tax Act 1961. The grounds of appeal raised questions regarding the deletion of the penalty without appreciating the inadmissible claims made by the assessee, which were disallowed, and the failure to declare true income triggering Explanation 1 to section 271(1)(c) of the Act.

2. The assessee initially filed its return of income for AY 2012-13 declaring a loss and subsequently revised it. The Assessing Officer made additions during assessment, including pre-operative expenses and interest income, leading to penalty proceedings u/s 271(1)(c). The assessee contended that the additions were on an estimate basis and not due to concealment or inaccurate details, maintaining that the return was true and correct.

3. The AO imposed a penalty on the disallowed amounts, which the assessee challenged before the CIT(A). The CIT(A) relied on various judicial decisions and deleted the penalty, emphasizing that the mere disallowance of a claim does not automatically warrant a penalty under section 271(1)(c) of the Act.

4. During the appeal before the ITAT, the Revenue argued in favor of confirming the penalty, citing the inadmissible claims made by the assessee. In contrast, the assessee's counsel supported the CIT(A)'s decision based on the legal precedents referred to in the appellate order.

5. The ITAT considered the facts presented in the assessment order and noted that the assessee had disclosed all relevant information. It emphasized that the treatment of the claims by the AO was the central issue. Relying on the Supreme Court decision in Reliance Petroproducts (P.) Ltd., the ITAT upheld the CIT(A)'s order, stating that the mere rejection of a claim does not automatically attract a penalty under section 271(1)(c) of the Act.

6. Ultimately, the ITAT dismissed the appeal, affirming the decision of the CIT(A) to delete the penalty. The judgment was pronounced in open court on 27/12/2018.