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2019 (8) TMI 845 - AT - Income TaxLevy of penalty u/s 271(1)(c) - Disallowance u/s 14A - assessee accepted disallowance to the extend of dividend income - HELD THAT - Under the very scheme under section 14A, the apportionment of the expenditure attributable to earning exempt income, was difficult for identifying exactly on the precise, numerical and mathematical basis and to have rationality in the disallowance, the rule 8D has been introduced by the CBDT, but that too is a kind of estimate only. The difference between the suo-motu disallowance by the assessee in the return of income and the amount upheld by the AO, can be termed as variation in the estimate of expenditure attributable to earning exempt income by the assessee and by the AO and same cannot be tantamount to furnishing of any inaccurate particulars of income. Merely making a claim, which is held as non-sustainable under the law, should not lead to penalty under section 271(1)(c) of the Act, when the assessee has furnished details of particulars in the return of income. The assessee is not found to be involved in camouflaging or filing inaccurate details of expenses. Every disallowance made does not justify and mandate levy of penalty u/s 271(1)(c) - in the case of CIT versus Reliance Petro Products Private Limited 2010 (3) TMI 80 - SUPREME COURT held that where no information given in the return of income is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars and by no stretch of imagination making an incorrect claim can tantamount to furnishing inaccurate particular of income. - Decided in favour of assessee.
Issues:
- Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2009-10. - Disallowance under section 14A of the Act. - Applicability of Rule 8D of Income Tax Rules, 1962 for quantifying disallowance. - Justification for penalty imposition based on inaccurate particulars of income. Analysis: 1. Appeal against Penalty under Section 271(1)(c): The appeal was directed against the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The assessee contested the penalty, arguing that all relevant particulars were provided, and hence, no penalty should have been levied. 2. Disallowance under Section 14A: The case involved disallowance under section 14A of the Act. Initially, the Assessing Officer made a disallowance of a certain amount, which was later restricted by the Ld. CIT(A). However, the Tribunal set aside the Ld. CIT(A)'s order and restored the issue to the Assessing Officer. Subsequently, the assessee accepted the disallowance, and penalty proceedings were initiated under section 271(1)(c) of the Act. 3. Applicability of Rule 8D for Quantifying Disallowance: The Ld. CIT(A) upheld the penalty, stating that the assessee did not follow the guidelines provided by the CBDT for quantifying the disallowance under section 14A. The Ld. CIT(A) emphasized the introduction of Rule 8D from assessment year 2008-09 for quantifying such disallowances. The failure to adhere to these guidelines led to the imposition of the penalty. 4. Justification for Penalty Imposition: The Ld. CIT(A) held that the assessee deliberately avoided the provisions of section 14A and Rule 8D, leading to the filing of inaccurate particulars of income. The Ld. CIT(A) justified the penalty imposition based on the failure to follow the prescribed guidelines and clear-cut methodology for quantifying disallowances related to earning exempt income. 5. Tribunal's Decision and Rationale: The Tribunal analyzed the case and found that the disallowance made by the Assessing Officer was based on the decision of the Hon'ble Delhi High Court and not strictly as per Rule 8D computation. The Tribunal reasoned that the difference between the assessee's suo-motu disallowance and the final disallowance upheld by the Assessing Officer was a variation in estimates, not inaccurate particulars. The Tribunal cited the Hon'ble Supreme Court's decision to emphasize that making a non-sustainable claim does not warrant a penalty under section 271(1)(c) when details were provided in the return of income. 6. Final Decision and Outcome: The Tribunal set aside the Ld. CIT(A)'s findings and canceled the penalty imposed under section 271(1)(c) of the Act. The Tribunal concluded that the assessee had not furnished inaccurate particulars of income and that the penalty was not justified in this case. Consequently, the appeal of the assessee was allowed, and the penalty was canceled. In conclusion, the Tribunal's detailed analysis highlighted the importance of providing accurate particulars of income and adhering to prescribed guidelines, ultimately leading to the cancellation of the penalty in this case.
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