2021 (2) TMI 530 - AT - Income Tax

Penalty 271(1)(c) - case of difference of opinion between the assessee and the learned Assessing Officer in respect of the treatment to be given to a particular expenditure - HELD THAT - We are satisfied that it s not the case of concealment of income nor of furnishing of any inaccurate particulars but it is only a case of difference of opinion between the assessee and the learned Assessing Officer in respect of the treatment to be given to a particular expenditure. Further the assessee does not stand to much gain by this differential treatment also. The essential ingredients to attract the provisions under section 271(1)(c) of the Act do not seem to have been existing in this case. In CIT vs Reliance Petroproducts Pvt Ltd 2010 (3) TMI 80 - SUPREME COURT held that when the assessee preferred a claim, it was up to the authorities to accept its claim in the Return or not, but merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty under Section 271(1 )(c) of the Act. It was further held that if the contention of the Revenue is accepted, then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c) and that is clearly not the intendment of the Legislature. There is no basis for the authorities below to levy are sustained the penalty and the same has to be deleted. - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for deferred Revenue expenditure claim.

Detailed Analysis:
1. The assessee filed a return showing a total income for the assessment year 2006-07. The Assessing Officer made an addition on account of default Revenue expenditure, administrative expenses, business promotion, and depreciation. The Assessing Officer allowed depreciation on the disputed expenditure but initiated penalty proceedings under section 271(1)(c) of the Act.

2. The assessee contended that the deferred Revenue expenditure should be allowed based on the matching concept, citing a Supreme Court ruling. The CIT(A) disagreed, stating that the claim amounted to furnishing inaccurate particulars. The Revenue argued that the claim was false despite expert opinion, while the assessee maintained there was no concealment of income or expenditure, only a difference in treatment.

3. The assessee had incurred significant expenses based on a customer agreement and sought to spread the expenditure over several years. The Assessing Officer treated the expenses as capital and disallowed them, leading to the penalty dispute. The assessee argued for a 50% allocation over two blocks of 3 years, resulting in a minor difference in percentage.

4. The ITAT found no concealment or furnishing of inaccurate particulars, rather a divergence in opinion between the assessee and the Assessing Officer. Citing a High Court decision, the ITAT emphasized that penalty should not be imposed for a plausible claim made during assessment. Referring to a Supreme Court ruling, the ITAT highlighted that a claim's rejection does not automatically warrant a penalty.

5. Consequently, the ITAT concluded that the penalty was unjustified, as the assessee's claim, though disputed, did not meet the criteria for penalty under section 271(1)(c). The ITAT allowed the appeal, overturning the penalty imposed by the Assessing Officer.

In summary, the ITAT ruled in favor of the assessee, finding no grounds for sustaining the penalty for the deferred Revenue expenditure claim, emphasizing the absence of concealment or furnishing inaccurate particulars, and highlighting the need for a liberal view on claims made during assessment.