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2020 (1) TMI 1110 - AT - Income TaxPenalty u/s.271(l)(c) - disallowance of consolidated tax u/s 43B - HELD THAT - Admittedly the amount of consolidated tax was not eligible for deduction as per the provisions of section 43B but the same was eligible for deduction on payment basis in the subsequent assessment year as the payment made by the assessee falls in the subsequent assessment year. However neither the assessee nor the AO has claimed/allowed the deduction in the subsequent assessment year. Claim made by the assessee in the profit and loss account was not the false claim. As such the claim made by the assessee was disallowed by the operation of law i.e. under the provision of section 43B of the Act. Therefore such claim of the assessee can be regarded as a wrong claim but the same cannot be equated with the concealment of income or furnishing inaccurate particular of income. Therefore we are of the view that the assessee cannot be visited with the penalty on account of concealment of income Disallowance u/s 36(1)(v) on account of delayed payment of ESI and PF - HELD THAT - The assessee in the present case has filed his revised return of income dated 18-04-2011 claiming the deduction of the aforesaid amount whereas the judgment of CIT vs. Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT . Thus it is evident that the assessee was not aware of the judgment relied by the learned CIT (A) while imposing the penalty on account of concealment of income. We also note that the judgment of Hon ble Delhi High Court in the case of AIMIL Ltd 2009 (12) TMI 38 - DELHI HIGH COURT was in favour of the assessee which was rendered dated 23-12-2009 i.e. before filing the return of income by the assessee. Accordingly we find that the assessee has claimed the deduction under the bona fides believe. Hence we hold that the assessee cannot be visited with the penalty in the given facts and circumstances on account of concealment of income. Disallowance of interest expenses being capital in nature - HELD THAT - There is no allegation that the impugned interest expense was incurred in connection with the extension of the existing business of the assessee. Therefore the mere claim of interest expenses as revenue in nature cannot be equated with the concealment/ inaccurate particular of income. As such the assessee has disclosed all the material facts in the financial statements and furthermore its claim was not found to be false. Thus we hold that the assessee has claimed deduction for such interest expenses under the bona fides believe and therefore there cannot be any penalty on account of concealment of income. Disallowance on account of penalty payment to Sales tax and Excise department - HELD THAT - Admittedly the penalties levied on account of contravention of the provisions of law are not allowable for deduction. But the penalty which is compensatory in nature can be claimed as business expenses. However we note that there is no such finding given by the authorities below on such aspect. Assessee has furnished all the requisite details in its financial statements and therefore it cannot be said that the assessee has concealed particular of income. As such the assessee has claimed the deduction under the bona fides believe. We hold that the penalty can be levied where the assessee has concealed the particular of income/furnished inaccurate particular of income. However from the preceding discussion we note that none of the deduction claimed by the assessee has been held as false. Thus at the most the claim made by the assessee can be wrong/inaccurate claims which cannot be treated as concealment/inaccurate particular of income. In holding so we find support and guide from the judgment of Hon ble Supreme Court in case of Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT We also note that there was no mala-fide intention of the assessee to furnish the inaccurate/ conceal the particulars of income. So there cannot be any penalty in the present facts and circumstances - Decided in favour of assessee.
Issues Involved:
1. Disallowance of ?91,726/- being payment of consolidated tax under section 43B. 2. Disallowance of ?2,97,572/- under section 36(1)(v) being delayed payment of ESI and PF. 3. Disallowance of ?1,530/- under section 36(1)(iii) being interest paid on purchase of capital goods. 4. Disallowance of ?14,500/- under section 37 being penalty paid to Sales Tax and Excise Department. Detailed Analysis: 1. Disallowance of ?91,726/- being payment of consolidated tax under section 43B: The assessee claimed an expenditure of ?10,99,789/- towards consolidated tax in the profit and loss account, out of which ?91,726/- was paid after the due date of filing the Income Tax Return. The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The assessee argued that the deduction was claimed under a bona fide belief and the tax auditor had not disallowed it. The CIT(A) upheld the AO's order, stating the assessee concealed particulars of income. However, the Tribunal found that the claim was not false but disallowed by operation of law (section 43B). Hence, the penalty for concealment of income was not justified. 2. Disallowance of ?2,97,572/- under section 36(1)(v) being delayed payment of ESI and PF: The assessee claimed the deduction based on the judgment of Hon’ble Delhi High Court in AIMIL Ltd., which was in favor of the assessee. The jurisdictional High Court's judgment in CIT vs. Gujarat State Road Transport Corporation, which was against the assessee, was rendered after the filing of the revised return. The Tribunal concluded that the deduction was claimed under a bona fide belief and thus, the penalty for concealment of income was not warranted. 3. Disallowance of ?1,530/- under section 36(1)(iii) being interest paid on purchase of capital goods: The assessee claimed the interest expenses as revenue expenditure, believing it was allowable. The CIT(A) upheld the AO's disallowance, stating it was capital in nature. The Tribunal noted that there was no allegation that the interest expense was incurred for the extension of the existing business. The claim was not false, and the assessee disclosed all material facts. Thus, the penalty for concealment of income was not justified. 4. Disallowance of ?14,500/- under section 37 being penalty paid to Sales Tax and Excise Department: The assessee argued that the expenses were incurred in the course of business and wrongly classified as a penalty. The CIT(A) upheld the AO's disallowance, stating penalties are not allowable deductions. The Tribunal found no evidence that the penalties were compensatory in nature and noted that the assessee disclosed all requisite details. Therefore, the penalty for concealment of income was not justified. Conclusion: The Tribunal set aside the CIT(A)'s findings and directed the AO to delete the penalty imposed under section 271(1)(c) for all the disallowances. The appeal of the assessee was allowed. The Tribunal emphasized that a mere wrong claim does not amount to furnishing inaccurate particulars of income or concealment of income. The order was pronounced on 23/01/2020 at Ahmedabad.
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