2024 (11) TMI 1065 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of factory garden maintenance expenses - As argued no case of furnishing any inaccurate particulars of income was proved by the AO as assessee had submitted the details of invoices, ledger and payment details in respect of the expenses - HELD THAT - There is no dispute that the said expenses were incurred by the assessee and all the information at the time of quantum addition have been provided by the assessee and same has not been disputed by the A.O. The penalty u/s. 271(1)(c) of the Act cannot be levied merely for the rejection of the claim of the assessee as held by the Hon'ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT Respectfully following the same, we are of the opinion that the penalty levied by the ld. A.O. and upheld by the ld. CIT(A) is not sustainable. The ground of appeal of the assessee is accordingly allowed.

Summary

Issues:
Penalty under section 271(1)(c) for disallowance of factory garden maintenance expenses.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) regarding the penalty imposed under section 271(1)(c) for disallowance of factory garden maintenance expenses. The assessee contended that no inaccurate particulars of income were furnished, as all details were submitted to the Assessing Officer, and the expenses were incurred for business purposes in compliance with Pollution Control Board norms. The Assessing Officer disallowed the expenses, leading to penalty proceedings. The CIT(A) upheld the penalty, stating that the appellant failed to offer a satisfactory explanation as required by law. The appellant argued that the rejection of certain expenses does not necessarily mean inaccurate particulars were furnished, citing a Supreme Court case. The Tribunal found that the expenses were genuine and necessary for compliance with environmental regulations, thus overturning the penalty imposed by the lower authorities.

The Tribunal noted that the expenses were duly submitted with documentary evidence during assessment proceedings, and the Assessing Officer did not dispute the accuracy of the information provided. The only contention was whether the expenses were incurred exclusively for business purposes. The Circular issued by the Pollution Control Board supported the necessity of such expenses for environmental compliance. Relying on the Supreme Court precedent, the Tribunal held that the penalty under section 271(1)(c) cannot be imposed solely based on the rejection of certain expenses. Therefore, the Tribunal allowed the appeal and canceled the penalty levied by the Assessing Officer.

The Tribunal's decision was based on the finding that the expenses were genuine, necessary for compliance with environmental regulations, and supported by documentary evidence. The Tribunal emphasized that the rejection of certain expenses does not automatically imply the furnishing of inaccurate particulars of income. By following the Supreme Court precedent, the Tribunal concluded that the penalty imposed was not justified in this case. Consequently, the Tribunal set aside the penalty order and allowed the appeal filed by the assessee, ruling in favor of canceling the penalty under section 271(1)(c) for the disallowance of factory garden maintenance expenses.