2016 (5) TMI 1630 - AT - Income Tax

Penalty u/s. 271(1)(c) - Disallowance of product promotion commission pursuant to the order of TPO Disallowance of Trade Mark Registration charges and Overseas Product Registration Expenses u/s. 35(2AB) Price Difference on account of sale of Raw material/Products to sister concern Disallowance of expenses pertaining to sister concern u/s. 37 Denying the exemption to the Ahmednagar Unit u/s. 10B (7) and Exclusion of income of Section 10B for Ahmednagar for computing Book Profit u/s. 115JB - HELD THAT -These issues have been decided by us in quantum appeal in favour of the assessee and against the revenue in 2017 (1) TMI 1109 - ITAT AHMEDABAD . Therefore we do not find any reason for the levy of penalty u/s. 271(1)(c) of the Act in respect of these issues. Addition of provision for deferred tax u/s. 115JB (6) - We find that the additions have been confirmed due to the retrospective amendment of Section 115JB. However we find that on the date of filing of the return the claim was supported by the provisions of law and the assessee could not foresee the future amendment. Therefore we do not find any reason for levying penalty for the addition confirmed due to subsequent amendment brought in the provisions. We therefore confirmed the findings of the ld. CIT (A) and dismissed revenue s appeal on this count also.

Summary

The Appellate Tribunal (ITAT Ahmedabad) disposed of cross appeals (ITA Nos. 3025 & 3069/Ahd/2010) concerning penalty under section 271(1)(c) of the Income Tax Act for A.Y. 2005-06. The penalty related to various disallowances and additions including Transfer Pricing adjustments, trademark registration expenses, deferred tax provisions under section 115JB, and exemption under section 10B.Key holdings include:- The Tribunal confirmed the CIT(A)'s order dismissing the Revenue's penalty appeal, noting that except for the deferred tax provision addition (due to retrospective amendment of section 115JB), all other issues were decided in favor of the assessee in quantum appeals (ITA Nos. 2430 & 2400/Ahd/2009).- Regarding the deferred tax addition, the Tribunal held that since the assessee's claim was supported by law at the time of filing and the amendment was unforeseeable, "we do not find any reason for levying penalty."- The assessee's appeal against penalty was allowed because the Transfer Pricing adjustments, which formed the sole basis for penalty, were deleted in the quantum proceedings.In essence, the Tribunal emphasized that penalty under section 271(1)(c) cannot be sustained where additions are deleted or based on unforeseeable retrospective amendments, reaffirming that penalty requires a "concealment" or "mischief" which was not established here.