2019 (5) TMI 1195 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on deemed dividend u/s 2(22)(e) - difference of opinion between the Assessing Officer and the assessee - HELD THAT - The assessee had claimed this amount as loan from a sister concern, which the Assessing Officer has held to be deemed dividend u/s 2(22)(e) of the Act. The undisputed fact is that this amount of ₹ 3,00,000/- was disclosed by the assessee in its balance sheet as loan and from the copy of balance sheet itself, the Assessing Officer further enquired about the nature of the transaction. Therefore, it cannot be said that the assessee has furnished wrong particulars of income or had concealed any income. The penalty has been imposed only on account of difference of opinion between the Assessing Officer and the assessee. The assessee held it to be a loan taken from a sister concern whereas the Assessing Officer treated it as deemed dividend. In a debatable issue and in a case like this where the assessee had furnished complete details of the transaction, the penalty cannot be imposed as has been held by various decisions. - Decided in favour of assessee.

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the IT Act based on deemed dividend addition.

Analysis:
1. The appeal was against the CIT(A)'s order upholding a penalty of ?92,700 imposed under section 271(1)(c) of the IT Act for the assessment year 2013-14. The appellant raised grounds challenging the imposition of penalty, arguing that there was no concealment or furnishing of inaccurate particulars of income.

2. The brief facts revealed that an addition of ?3,00,000 was made as deemed dividend during the assessment under section 143(3) of the Act, leading to the penalty imposition. The CIT(A) upheld the penalty, stating that the appellant failed to prove the transaction as a trading one, hence justifying the addition and penalty.

3. During the hearing, the appellant contended that all necessary details were provided to the Assessing Officer, and the addition was based on the officer's opinion, not on concealment or inaccurate particulars. The appellant argued that the issue of deemed dividend was debatable, citing precedents where penalties were deleted in similar cases.

4. The Tribunal noted that the penalty was solely imposed due to a difference in opinion between the appellant and the Assessing Officer regarding the nature of the transaction. As the appellant disclosed the amount in the balance sheet and provided details, the penalty for a debatable issue like deemed dividend was deemed unjustified, as supported by relevant case laws.

5. Citing a Mumbai Bench decision, the Tribunal emphasized that when all material facts are disclosed, and additions are based on legal interpretation, it is not appropriate to impose a penalty under section 271(1)(c). The Tribunal concluded that the penalty was unwarranted, directing the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Act.

6. Consequently, the Tribunal partially allowed the appeal, deleting the sustained penalty and emphasizing that in cases involving debatable issues like deemed dividend, penalties under section 271(1)(c) should not be imposed when all relevant details are disclosed.