2019 (6) TMI 87 - AT - Income Tax

Penalty u/s 271(1)(c) - adhoc disallowance of expenses - Part disallowance of expenditure - HELD THAT - There cannot be any doubt about the genuineness of expenditure claimed as the Assessing Officer himself has allowed 75% of the total expenditure claimed. The disallowance of 25% is purely on ad hoc / estimate basis on the allegation that such expenditures are not fully verifiable. There is nothing on record to suggest that the assessee did not furnish full particulars of expenditure claimed or there was any act of omission or commission on the part of the assessee in furnishing the particulars of expenditures. Part disallowance of expenditure claimed is purely on estimate basis. In the aforesaid circumstances, the assessee cannot be accused of furnishing inaccurate particulars of income. More so, when the first appellate authority being convinced with the submissions of the assessee had deleted the disallowance, though of course, such disallowance was restored by the Tribunal. We are inclined to delete the penalty imposed u/s 271(1)(c) - Decided in favour of assessee

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2008-09.

Analysis:
The appeal was filed by the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09. The Assessing Officer had disallowed 25% of the total expenditure claimed by the assessee on an ad-hoc basis, leading to the penalty imposition. The Commissioner (Appeals) initially deleted the disallowance, but the Tribunal later upheld it. Subsequently, the penalty was imposed by the Assessing Officer, which was challenged by the assessee before the first appellate authority without success.

The authorized representative of the assessee argued that the genuineness of the expenditure claimed was not in doubt, as the Assessing Officer had allowed 75% of the total expenditure. It was contended that there was no case of furnishing inaccurate particulars of income. On the other hand, the Departmental Representative relied on the observations of the Assessing Officer and the Commissioner (Appeals) to support the penalty imposition.

Upon considering the submissions and the material on record, the Tribunal noted that the expenditure claimed by the assessee was justified during the assessment proceedings. The expenditure was allocated by India Infoline Ltd. towards shared services, and the genuineness of the claimed expenditure was not in question, as evidenced by the fact that 75% of it was allowed by the Assessing Officer. The disallowance of 25% was deemed ad-hoc and based on estimates, not due to any lack of verifiability of the expenditures. The Tribunal found no evidence of inaccurate particulars of income being furnished by the assessee, especially since the first appellate authority had deleted the disallowance, even though it was later restored by the Tribunal. Consequently, the penalty under section 271(1)(c) of the Act was deemed unjustified and was deleted by the Tribunal.

In conclusion, the appeal was allowed, and the penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09 was set aside.