2009 (12) TMI 709 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty u/s 271(1)(c) for filing inaccurate particulars of income.
2. Bona fide belief and reliance on judicial precedents for claiming deductions.
3. Applicability of Explanation 1 to section 271(1)(c).

Summary:

1. Imposition of penalty u/s 271(1)(c) for filing inaccurate particulars of income:
The Revenue appealed against the Commissioner of Income-tax (Appeals) order dated July 17, 2003, which deleted the penalty of Rs. 26,47,246 imposed u/s 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer (AO) had reduced the deduction claimed by the assessee u/s 80-I by Rs. 49,02,306 and initiated penalty proceedings for filing inaccurate particulars of income. The AO levied the penalty for the excess claim of deduction amounting to Rs. 49,02,806.

2. Bona fide belief and reliance on judicial precedents for claiming deductions:
The assessee claimed the deduction based on the decisions of the Orissa High Court in CIT v. Tarun Udyog [1991] 191 ITR 688 and the Karnataka High Court in CIT v. H. M. T. Ltd. [1993] 199 ITR 235, believing that they were entitled to the deduction without setting off the brought forward investment allowance. The Commissioner of Income-tax (Appeals) found that the assessee had not concealed any facts and had made the claim based on the judicial precedents available at the time, thus deleting the penalty.

3. Applicability of Explanation 1 to section 271(1)(c):
The Tribunal noted that Explanation 1 to section 271(1)(c) applies to cases of concealment of income, not for furnishing inaccurate particulars of income. The AO imposed the penalty for furnishing inaccurate particulars, and the onus was on the AO to prove this. The Tribunal found that the assessee had disclosed how the deduction u/s 80-I was claimed and that the claim was supported by various judicial decisions. The Tribunal concluded that the assessee's explanation was bona fide and substantiated by case laws, and thus, no penalty could be imposed.

The Tribunal also referenced the Supreme Court's decision in Union of India v. Dharamendra Textile Processors [2007] 295 ITR 244, noting that the penalty under section 271(1)(c) is a civil liability and does not require wilful concealment. However, in this case, there was no material evidence proving that the assessee furnished inaccurate particulars of income.

Conclusion:
The Tribunal upheld the Commissioner of Income-tax (Appeals) order, deleting the penalty imposed on the assessee u/s 271(1)(c), and dismissed the Revenue's appeal. The order was pronounced in the open court on December 11, 2009.