2023 (9) TMI 1316 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - additions made on account of Amortized value of Leasehold Land and Depreciation claimed on Right to use Leasehold Land - HELD THAT - Jurisdictional High Court in case of Sun Pharmaceuticals Ind. Ltd. 2009 (3) TMI 587 - GUJARAT HIGH COURT have held that such expenditure on right to use leasehold land are allowable as revenue expenditure, which means such issue is also highly debatable and therefore no penalty u/s 271(1)(c) can be levied on it. We have no hesitation in confirming the order passed by the Ld. CIT(A). Thus the grounds raised by the Revenue is devoid of merits and the same is hereby dismissed.

Summary

Issues involved:
The appeal concerns the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) in relation to the Assessment Year 2011-12.

Summary of Judgment:

Issue 1:
The Revenue challenged the deletion of penalty of Rs. 2,27,86,676/- u/s. 271(1)(c) of the Act by the Ld. CIT(A) relating to disallowances made in the assessment for the Assessment Year 2011-12.

The Assessee, engaged in development and maintenance of Ports & Economic Zone, filed its return of income declaring total income of Rs. 30,81,75,558/-. The AO initiated penalty proceedings for furnishing inaccurate particulars of income related to disallowances. The Ld. CIT(A) confirmed certain additions leading to the issuance of a fresh penalty notice. The assessee contended that the matter was debatable and pending before ITAT, hence penalty should not be levied.

The Ld. CIT(A) deleted the penalty considering the bonafide nature of the claim, citing relevant case laws. The appellant's claim was apparent in the computation of income and tax audit report, certified by the tax auditor, hence not inviting penalty for inaccurate particulars.

The Revenue appealed against this deletion, arguing that the additions were deleted on merits in the quantum appeal. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the issue was debatable and penalty under section 271(1)(c) could not be levied.

Issue 2:
The Revenue further contested the deletion of penalty on disallowance of expenditure on leasehold land and depreciation on the right to use leasehold land.

The Ld. CIT(A) considered the issue in detail and referred to relevant case laws. The Tribunal noted that the additions made by the Assessing Officer were also deleted in the quantum appeal. The Hon'ble Jurisdictional High Court held that such expenditures were allowable as revenue expenditure, indicating a debatable issue not warranting penalty under section 271(1)(c).

The Tribunal, following the principles laid down by the Hon'ble Supreme Court and High Court, confirmed the Ld. CIT(A)'s order, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to delete the penalties under section 271(1)(c) in both issues, emphasizing the bonafide nature of the assessee's claims and the debatable nature of the issues involved. The Revenue's appeal was dismissed.