2020 (10) TMI 414 - AT - Income Tax

Penalty levied u/s.271(1)(c) - addition made on account of prior period expenses and foreign exchange loss - CIT(A) himself upheld the action of the AO in respect of the quantum addition - HELD THAT - Revenue has not doubted the genuinity of the return filed by the assessee and has not said that the particular of expenses claimed in the return were not correct. The expenses were claimed and quantum additions have been upheld by the Tribunal. However, in the separate proceedings of penalty u/s.271(1)(c) of the Act when the Revenue has accepted the return of the assessee and has not brought on record any material to show that whatever stated in the return is incorrect or inaccurate, in such scenario, there is no question of imposing penalty under the said provision. In view of the above facts and circumstances and relying on the aforesaid judgment of the Hon‟ble Apex Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT we are of the view that on these grounds, penalty u/s.271(1)(c) of the Act cannot be levied. Thus, Ground No.1 and 3 raised in appeal by the Revenue are dismissed.

Summary

Issues:
1. Justification for deleting penalty under section 271(1)(c) of the Income Tax Act for various additions made by the Assessing Officer.
2. Analysis of quantum additions and their impact on the penalty imposed.
3. Legal principles governing the imposition of penalties under section 271(1)(c) of the Act.

Issue 1: Justification for Deleting Penalty on Various Additions:
The appeal by the Revenue challenged the deletion of penalties under section 271(1)(c) of the Income Tax Act by the Ld. CIT(Appeals) in relation to additions made for prior period expenses, commission expenses, foreign exchange loss, and professional expenses. The Tribunal analyzed each addition individually based on the quantum appeal decision by the Pune Bench. The Tribunal upheld the deletion of penalties for commission expenses and professional expenses as the quantum additions were previously deleted, rendering the penalties unjustified.

Issue 2: Analysis of Quantum Additions Impacting Penalty:
The Tribunal referred to the quantum appeal decision where the Pune Bench had deleted the additions related to commission expenses and professional expenses. The Tribunal noted that once the quantum additions were removed, the penalties under section 271(1)(c) of the Act could not be sustained. The Tribunal also considered the legal principle that if the quantum addition is deleted, the penalty has no basis to stand, leading to the dismissal of the Revenue's appeal regarding these additions.

Issue 3: Legal Principles for Imposing Penalties under Section 271(1)(c):
In analyzing the penalty imposition, the Tribunal cited the Supreme Court's decision in CIT Vs. Reliance Petro Products, emphasizing that a mere unsustainable claim in the return does not constitute furnishing inaccurate particulars. The Tribunal found that the Revenue did not challenge the genuineness of the assessee's return or the correctness of the expenses claimed. As the quantum additions were confirmed, and no evidence of inaccurate particulars was presented, the Tribunal dismissed the penalties under section 271(1)(c) for prior period expenses and foreign exchange loss.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deletion of penalties for various additions based on the quantum appeal decisions and the legal principles governing penalty imposition under section 271(1)(c) of the Income Tax Act.