2019 (3) TMI 736 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of payment made to employees under voluntary separation scheme (VSS) - only 1/5th of such expenditure is allowable in current year - existence of two views - AO is not sure whether the penalty is levied for concealment of income or furnishing of the inaccurate particulars of income - HELD THAT - There are 2 views on the allowability of the above sum on which penalty has been levied. We also noted that the AO is also not sure whether the penalty is levied for furnishing of inaccurate particulars of income or concealment of income. In view of the appreciation of the complete facts, order of the coordinate bench in case of the assessee for earlier years on the quantum proceedings as well as on the penalty proceedings 2015 (10) TMI 2239 - ITAT DELHI & 2013 (12) TMI 297 - ITAT DELHI , we are of the opinion that on the above disallowance penalty cannot be levied as there are conceivably 2 opinions on the same set of facts. CIT appeal has deleted the penalty primarily on this reason. On reading the penalty order itself it is found that the AO is not sure whether the penalty is levied for concealment of income or furnishing of the inaccurate particulars of income. Therefore, on this ground also the penalty is not sustainable. Accordingly we confirm the order of the learned CIT A deleting the penalty on account of payment made to employees under voluntary separation scheme - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) for disallowance of payment made to employees under Voluntary Separation Scheme (VSS) for Assessment Year 2007-08.

Analysis:
1. The Assessing Officer disallowed a portion of the payment made to employees under VSS, initiating penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) deleted the disallowance, but the Revenue contested, leading to the ITAT confirming the disallowance.
2. The Assessing Officer then levied a penalty under section 271(1)(c) based on the disallowance upheld by the ITAT. The penalty was challenged by the assessee, arguing that the issue was debatable as different authorities had interpreted it differently.
3. The CIT(A) deleted the penalty, noting that the issue was debatable with more than two possible opinions. The penalty was upheld for the prior period expenditure not in dispute.
4. The Revenue appealed against the deletion of the penalty, arguing that the assessee furnished inaccurate particulars of income and wrongly claimed deductions, justifying the penalty.
5. The ITAT considered the conflicting views on the allowability of the disallowed sum, noting that there were differing decisions by the coordinate bench on similar issues for other assessment years. The ITAT found that the penalty was not sustainable due to the debatable nature of the issue and lack of clarity in the penalty order.
6. Ultimately, the ITAT confirmed the CIT(A)'s decision to delete the penalty, dismissing the appeal of the assessing officer.

This detailed analysis highlights the progression of events leading to the appeal against the penalty deletion and the rationale behind the ITAT's decision to uphold the deletion based on the debatable nature of the issue and conflicting interpretations by different authorities.