HERCULES AUTOMOBILES INTERNATIONAL PRIVATE LIMITED,THIRUVANANTHAPURAM vs. AO TYPE-W, AAYAKAR BHAWAN, ALLEPPEY

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

On the other hand, the learned Sr. DR submits that in the case of reassessment penalty u/s. 271(1)(c) is automatic in view of Explanation (5a) to section 271(1)(c) of the Act.

We have heard the rival contentions and perused the material available on record. The issue that arises in the present appeal is whether the order imposing penalty u/s. 271(1)(c) is justified or not. Penalty proceedings were initiated on account of disallowance of loss on account of foreign currency transaction of Rs. 21,84,084/-. The mere fact that the additions were made to the returned income by disallowing certain deductions by itself does not lead to the conclusion that the assessee concealed particulars of income or furnished incorrect particulars of income and provisions of section 271(1)(c) is not attracted. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroporducts Pvt. Ltd. [2010] 322 ITR 158. Relevant portion of the judgement if extracted below: - “ It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed Hercules Automobiles International P. Ltd. excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.”

In view of the above discussion, we are of the considered opinion that the facts of the present case does not warrant levy of penalty u/s. 271(1)(c) of the Act.

In the result, the appeal filed by the assessee stands allowed.