2021 (9) TMI 1178 - AT - Income Tax

Levy of penalty - Guest house maintenance expenses - CIT(A) deleted the penalty - HELD THAT - Assessee continuously claimed the expenditure incurred on guest houses as allowable business deductions since A.Y. 2002-03 till A.Y. 2007-08, and no disallowance has ever been sustained by the ld. Commissioner. Even the finding of the ld. Commissioner in the instant case is very clear to the effect that neither the element of concealment of income nor any inaccurate particulars of income furnished in the return. Further observation of the ld. Commissioner to the effects that the AO has not brought out any falsity or bogus claim of expenditure incorporated under the above heads of expenses goes to show that the said finding of the ld. Commissioner is clinching in its right perspective. Even otherwise, nothing material is available on record to controvert the findings of the Ld. Commissioner, hence we are inclined not to interfere with the conclusion drawn by the ld. Commissioner as the same does not suffer from any perversity, impropriety or illegality. Resultantly, this ground of appeal raised by the Revenue Department stands dismissed. Penalty u/s 271(1)(c) on the head Repairs of the road not belonging to the Assessee - Commissioner deleted the said penalty on the ground that there is neither the element of concealment of income nor any inaccurate particulars of income furnished in the return - HELD THAT - Considering the facts as the addition qua repairs and maintenance of assets not belonging to the company , has already been deleted by the Co-ordinate Bench, hence no penalty could survive and consequently the ground no. 2 is dismissed being infructuous. Penalty under the head payments made to the transporters - HELD THAT - Co-ordinate Bench of the Tribunal vide its order 2019 (12) TMI 203 - ITAT RAIPUR allowed the ground raised by the Assessee in the said appeal before the Tribunal qua addition under the head payments made to the transporters against which penalty is under consideration and remitted the issue back for statistical purposes to the file of AO for determining the allowability of expenses, hence the penalty imposed by the AO cannot survive. The Ld. DR also did not controvert the said factual position. Penalty u/s 271(1)(c) - addition on account of addition under the head Land Compensation and Rehabilitation Expenses - Department did not find the claim of the Assessee as maintainable and treated the same as Capital in nature as against Revenue in nature claimed by the Assessee and made the addition - HELD THAT - As for the previous years, the appeals against the said sustenance of expenses as capital in nature is pending before the Hon'ble Chhattisgarh High Court, therefore, issue qua addition also become debatable issue and support the bonafide claim of the Assessee and therefore there is no base to entail the penalty under section 271(1)(C) of the Act, hence on the aforesaid considerations, deliberations and observations, while respectfully following the propositions laid down by the Hon ble Apex Court and High Courts to the effects that the assessment proceedings and penalty proceeding are altogether different and merely because amount was disallowed does not ipso facto lead to levy of penalty and the penalty can not be levied simply on the reason that addition has been sustained. Further mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income and where no information given in the Return is found to be incorrect or inaccurate, the Assessee cannot be held guilty of furnishing inaccurate particulars.

Issues Involved:
1. Deletion of penalty for inadmissible guest house maintenance expenses.
2. Cancellation of penalty for repairs of the road not belonging to the Assessee.
3. Cancellation of penalty for payments made to transporters.
4. Sustaining penalty on account of addition under the head "Land Compensation and Rehabilitation Expenses."

Detailed Analysis of the Judgment:

1. Deletion of Penalty for Inadmissible Guest House Maintenance Expenses:
The Revenue Department challenged the deletion of a penalty imposed by the Assessing Officer (AO) for inadmissible guest house maintenance expenses amounting to ?2,10,000/-. The Tribunal noted that the Assessee had consistently claimed such expenses as allowable business deductions since AY 2002-03, and no disallowance had been sustained by the Commissioner in previous years. The Tribunal found that there was no element of concealment of income or furnishing inaccurate particulars of income by the Assessee. The Commissioner had observed that the AO did not bring out any falsity or bogus claim of expenditure. Consequently, the Tribunal upheld the Commissioner’s decision to delete the penalty, dismissing the Revenue’s appeal on this ground.

2. Cancellation of Penalty for Repairs of the Road Not Belonging to the Assessee:
The AO had imposed a penalty concerning repairs of a road not belonging to the Assessee, amounting to ?198.81 lakhs, claiming that the Assessee was concealing particulars of income by claiming a wrong deduction. The Commissioner deleted the penalty, stating that there was no concealment of income or inaccurate particulars furnished. The Tribunal referred to its previous order, which had deleted the addition under the same head, and noted that the Department did not refute this claim. As the addition had already been deleted by the Tribunal, no penalty could survive. Thus, the Tribunal dismissed the Revenue’s appeal on this ground as well.

3. Cancellation of Penalty for Payments Made to Transporters:
The AO had imposed a penalty of ?5801.76 lakhs under the head "payments made to the transporters," citing that the Assessee failed to produce required details, leading to disallowance of the expenditure. The Commissioner deleted the penalty, again finding no concealment of income or inaccurate particulars furnished. The Tribunal noted that the issue had been remitted back to the AO for determining the allowability of expenses in a previous order. As the penalty could not survive under these circumstances, the Tribunal dismissed the Revenue’s appeal on this ground too.

4. Sustaining Penalty on Account of Addition under the Head "Land Compensation and Rehabilitation Expenses":
The Assessee challenged the sustaining of a penalty on an addition of ?54,393.33 lakhs under the head "Land Compensation and Rehabilitation Expenses," which the AO had treated as capital in nature rather than revenue. The Commissioner had upheld the penalty, stating that the Assessee’s continuous claim of the expenditure as revenue in nature, despite it being consistently disallowed and treated as capital by the authorities and the Tribunal, amounted to furnishing inaccurate particulars of income.

The Tribunal, however, referred to several precedents, including the Supreme Court’s decision in CIT vs. Reliance Petro Products Pvt. Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars of income. The Tribunal found that the Assessee had not acted in defiance of the law or with dishonest conduct and that the issue was debatable with appeals pending before the High Court. Consequently, the Tribunal set aside the penalty, stating that the assessment and penalty proceedings are different, and merely because an amount was disallowed does not ipso facto lead to a levy of penalty.

Conclusion:
The Tribunal dismissed the Revenue Department’s appeals on all grounds, upholding the deletion of penalties for inadmissible guest house maintenance expenses, repairs of the road not belonging to the Assessee, and payments made to transporters. The Tribunal also set aside the penalty sustained on account of addition under the head "Land Compensation and Rehabilitation Expenses," emphasizing that merely making an incorrect claim does not amount to furnishing inaccurate particulars of income. The Tribunal’s decision was pronounced on 24-09-2021.

← Previous Next →