Synopsis of CIT Vs Larsen & Toubro Ltd (Bombay High Court) , Department fined for Rs.1 lakh

CIT Vs Larsen & Toubro Ltd (Bombay High Court) 

Frivolous appeals by department results in harassment to assessee & wastage of judicial time. Department to pay costs quantified at Rs.1 lakh for each appeal. Costs may be recovered from disciplinary action taken against, concerned official.

Sections involved: Section 271(1)(c)

Facts of the case: Assessee had claimed deduction under a particular section. As eventually that claim was disallowed, penalty under section 271(1)(c) of the Income-tax Act was imposed on the assessee.

The Tribunal deleted the levy of penalty u/s 271(1)(c) by following the judgment of the Supreme Court in Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 on the findings of the fact that merely because the assessee raised a claim, which was eventually disallowed, does not mean that ingredients of clause(c) are satisfied or fulfilled so as to justify imposition of penalty. The Department filed an appeal to the High Court.

Conclusion: The aggrieved HC dismissed the appeal stating that ‘In this case the findings are essentially based on the facts and circumstances peculiar to the 

assessee, thus it does not give rise to any substantial question of Law’.

The High Court also added that the least and minimum expected from the Revenue Officers is to accept and abide by tribunal’s findings in such matters and when they are based on settled principles of law.

As the numbers of such appeals were constantly increasing, the High Court issued an order dismissing such appeals with costs quantified at Rs. 1lakh for each such appeal.