2019 (6) TMI 592 - AT - Income Tax

Penalty levied u/s 271(1)(c) - excess claim of deduction u/ s. 35(2AB) - revising the claim of deduction in the revised computation of Income thereby indicating deliberate filing of inaccurate particulars of income - HELD THAT - Case do not justify the imposition of penalty as the AO has neither recorded its satisfaction about the deliberate and intentional act of the assessee nor recorded satisfaction about the concealment of particular of income or furnishing inaccurate particular of income nor specified the specific charge while issuing notice u/s 274 r.w.s. 271(1)(c). The notice issued by the AO is itself invalid. AO has not filed even single documentary evidences to substantiate its grounds of appeal. The ld CIT(A) deleted the penalty holding that the notice under section 274 rws 271(1) was not valid the assessing officer not bothered to bring on record the copy of the said notice. The assessing officer invoked the provision of Explaination-1 of section 271(1) and recorded that the assessee despite giving the opportunity has failed to offer any explanation. On the contrary the AO himself in para 2 of the penalty order dated 29.08.2016 duly recorded that the assessee filed its reply dated 09.08.2016 received in his office on 24.08.2016. The contents of the reply is also refereed by him in the order itself. Therefore no infirmity or illegality in the order passed by ld CIT(A) which we affirm. Assessee has not filed cross objection to support the order of ld CIT(A) on merit yet argued that the assessee has good case on merit and relied on the decision of CIT Vs Amoli Organics P. Ltd 2014 (4) TMI 1245 - GUJARAT HIGH COURT that mere denial of claim under section 35(2AB) would not lead to levy of penalty u/s 271(1)(c). Therefore in view of the facts that the submissions of the ld AR for the assessee are purely legal in nature thus needs consideration. The Hon ble High Court held that in the scrutiny assessment u/s 143(3) the assessee withdrew such claim since it failed in such challenged before CIT(A) by them. If the expenses incurred genuinely had been claimed in the return of income rejecting the claim may not result in to penalty proceedings nor would the withdrawal of claim is scrutiny proceedings in the said circumstances can be said to be concealment. - Appeal of the revenue is dismissed.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act for Assessment Year 2013-14.

Detailed Analysis:
1. Background: The appellant, a manufacturer and trader of electro fusing fittings, filed its return of income for Assessment Year 2013-14, declaring a loss. The assessment was completed under section 143(3) of the Act, disallowing a deduction under section 35(2AB) and initiating a penalty under section 271(1)(c).

2. Penalty Imposition: The Assessing Officer issued a show-cause notice for levying penalty, to which the assessee responded, justifying the deduction claimed under section 35(2AB) and stating that it was made in good faith based on audited accounts and approvals. However, the Assessing Officer imposed a penalty of ?3,11,27,792, alleging deliberate filing of inaccurate particulars of income.

3. Appellate Proceedings: The ld. CIT(A) deleted the penalty, citing that the penalty notice lacked specific details and the Assessing Officer did not apply his mind properly. The revenue appealed, arguing that the penalty was justified due to inaccurate particulars furnished by the assessee.

4. Legal Arguments: The AR of the assessee supported the CIT(A)'s decision, citing legal precedents where mere denial of a deduction claim did not warrant a penalty. Various legal positions were presented, including cases from Gujarat High Court and Mumbai Tribunal, emphasizing that the claim was genuine and disclosed in the return of income.

5. Judgment: The ITAT upheld the CIT(A)'s decision, emphasizing that the penalty notice was invalid as it did not specify the grounds clearly. The absence of evidence from the revenue to substantiate its appeal further weakened the case. Legal precedents were cited to support the conclusion that the penalty was not justified based on the facts and circumstances of the case.

6. Conclusion: The ITAT dismissed the revenue's appeal, highlighting that the penalty imposition lacked proper application of mind and failed to establish deliberate or intentional concealment of income. The legal arguments presented by the assessee were found to be valid, leading to the affirmation of the CIT(A)'s decision to delete the penalty.

This comprehensive analysis covers the background, penalty imposition, appellate proceedings, legal arguments, judgment, and conclusion of the case involving the deletion of a penalty under section 271(1)(c) of the Income Tax Act for the specified assessment year.