2021 (7) TMI 367 - AT - Income Tax

Penalty u/s 271(1)(c) - application of funds for charitable purposes exceeded the total receipts - depreciation claim of assessee trust - difference in the opinion on the part of the Ld.AO regarding the nature of receipt in the hands of assessee - HELD THAT - From the facts of this case it is clear that the assessee disclosed all the particulars of his income. AO has disallowed claim without holding it to be bogus or false. Thus, the genuineness of the claim is not in question here. Hon ble Supreme Court while elaborating the scope of section 271(1)(c) in CIT vs Reliance Petroproducts Pvt Ltd 2010 (3) TMI 80 - SUPREME COURT as held that by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars - Decided in favour of assessee.

Summary

Issues:
Penalty appeal against order dated 29/06/2018 for assessment year 2013-14.
1. Validity of penalty proceedings under section 271(1)(c) of the Act.
2. Nature of donations treated as corpus funds.
3. Disallowance of depreciation claimed on assets.
4. Approval for penalty granted without opportunity for Assessee.

Analysis:
1. The penalty proceedings were initiated under section 271(1)(c) based on the Ld.AO's view that the assessee concealed income. However, the penalty order was found to be untenable as the notice under section 274 did not clearly specify the grounds for penalty, as required by law. The Tribunal noted that no penalty is warranted when the returned and assessed income are the same, and the penalty amount sought to be evaded is nil. The approval for the penalty was granted without giving the Assessee an opportunity to present their case, violating principles of natural justice.

2. The issue of donations treated as corpus funds was crucial. The Ld.AO considered donations as capitation fees, not exempt in the hands of the assessee. The Ld.CIT(A) upheld this view, leading to the penalty imposition. However, the Tribunal found that the assessee had disclosed all income particulars, and the genuineness of the claim was not questioned. Citing relevant case law, the Tribunal concluded that making an incorrect claim in law does not amount to furnishing inaccurate particulars, and hence, the penalty was unjustified.

3. Regarding the disallowance of depreciation claimed on assets, the Tribunal noted that the issue was in favor of the assessee based on a Supreme Court decision. The disallowance was due to a difference of opinion, and no penalty could be levied on this matter.

4. The approval for the penalty was granted without affording the Assessee an opportunity to present their case before the Joint Commissioner of Income Tax, violating principles of natural justice. The Tribunal emphasized the importance of procedural fairness in such matters.

In conclusion, the Tribunal allowed the appeal, stating that the penalty was unjustified as the assessee had disclosed all income particulars, and the genuineness of the claim was not in question. The penalty was deleted based on legal principles and case law. Other grounds raised by the assessee were deemed academic as the penalty was deleted.