2014 (7) TMI 1180 - AT - Income Tax

Penalty under section 271(1)(c) - addition made on account of treatment of sales tax subsidy disallowance of interest advanced to assessee s concerns - Held that - The assessee is not exigible to levy of penalty on the treatment of sale tax subsidy as revenue receipt in the hands of the assessee and also on the disallowance made under section 36 (1) (iii) of the Act as we find no merit in holding the assessee to have furnished inaccurate particulars of income in respect of such debatable issue - Decided in favour of assessee

Summary

Issues Involved:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Analysis:

1. The appeal concerns the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961. The revenue challenged the deletion of penalty amounting to Rs. 4,14,45,686/- by the Commissioner of Income Tax (Appeals) related to the treatment of sales tax subsidy and disallowance of interest on advances made by the assessee.

2. The primary issue was whether the penalty under section 271(1)(c) of the Act was rightly deleted by the Commissioner of Income Tax (Appeals) on the treatment of sales tax subsidy as revenue receipt. The Assessing Officer had levied the penalty based on this issue along with other additions made during assessment.

3. The Tribunal referred to previous judgments in the assessee's own case and other relevant cases to establish that the treatment of sales tax subsidy as revenue or capital receipt was a debatable issue. The Tribunal highlighted that the claim made by the assessee was based on a possible view and not a deliberate attempt to conceal income.

4. The Tribunal emphasized that in cases where the treatment of an item as revenue or capital was debatable, the mere making of a claim not sustainable in law would not attract penalty under section 271(1)(c) of the Act. The Tribunal cited various judgments, including those by the Hon'ble Supreme Court and High Courts, to support its decision.

5. Regarding the disallowance of interest on advances made by the assessee, the Tribunal applied similar reasoning, stating that the issue was debatable and pending adjudication before the Hon'ble Supreme Court. Therefore, the assessee was not liable for penalty under section 271(1)(c) of the Act in this regard as well.

6. The Tribunal concluded that the assessee was not liable for the penalty on the treatment of sales tax subsidy as revenue receipt and the disallowance under section 36(1)(iii) of the Act. Upholding the order of the Commissioner of Income Tax (Appeals), the Tribunal dismissed the appeal of the revenue.

7. The judgment highlighted the principle that in cases involving debatable issues where the claim made by the assessee was based on a possible interpretation of the law, penalty under section 271(1)(c) would not be imposed. The Tribunal's decision was based on legal precedents and the specific circumstances of the case.

This analysis provides a detailed overview of the judgment, focusing on the issues involved and the Tribunal's reasoning behind dismissing the revenue's appeal against the deletion of the penalty.