2012 (8) TMI 889 - AT - Income Tax

Penalty u/s 271(1)(c) - Wrong claim of loss - Held that - Mere making of a wrong claim by the assessee by itself shall not constitute concealment of income or furnishing inaccurate particulars of income. The Assessing Officer has to complete the assessment after verifying various claims of the assessee. It is very much necessary to verify the claim of the assessee and if it is a genuine claim it has to be allowed. The claim of the assessee could not be allowed because provisions of the Act that were amended with effect from April 1, 2005 and the assessee has made a wrong claim in considering the new amendments and in our opinion, there is a bona fide error on the part of the assessee and that cannot be a reason for levy of penalty. More so, the assessee admitted the mistake in the course of assessment proceedings. Being so, we are of the opinion that there is a reasonable cause in this case. The provisions of section 271(1)(c) of the Act give discretionary powers to the Assessing Officer to levy or not to levy penalty in the case of concealment of income or furnishing inaccurate particulars of income. - Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute - Decided against Revenue.

Summary

Issues involved:
Deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2005-06 and 2006-07.

Detailed Analysis:

Issue 1: Deletion of penalty under section 271(1)(c) for assessment year 2005-06
The Revenue appealed against the deletion of penalty by the Commissioner of Income-tax (Appeals) for the assessment year 2005-06. The assessee claimed securities transaction tax, interest paid to broker, and loss on short-term capital gains from shares. The Assessing Officer added these amounts to the income of the assessee and levied a penalty under section 271(1)(c) of the Act for a wrong claim of set-off of excess loss under short-term capital gains. The Commissioner of Income-tax (Appeals) deleted the penalty, stating that a mere wrong claim by the assessee does not amount to furnishing inaccurate particulars of income or concealment of income. The Revenue appealed, arguing that the claim made by the assessee was inaccurate and should lead to penalty imposition.

Issue 2: Legal Precedents and Interpretation
The assessee cited legal precedents like CIT v. Honeywell Dace (India) Ltd., CIT v. Mehta Engineers Ltd., and CIT v. Reliance Petroproducts P. Ltd to support the argument that a wrong claim by itself does not constitute concealment of income or furnishing inaccurate particulars. The Tribunal analyzed these judgments and concluded that the Assessing Officer has discretionary powers to levy or not to levy penalty based on the circumstances. The Tribunal emphasized that penalty should not be imposed merely because it is lawful to do so and must be justified by deliberate defiance of the law or contumacious conduct. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) based on these legal principles.

Issue 3: Similarity in Assessment Year 2006-07
The facts in the assessment year 2006-07 were found to be similar to those in the assessment year 2005-06. Consequently, the issue raised by the Revenue in the appeal for the assessment year 2006-07 was also dismissed. Both appeals by the Revenue were ultimately dismissed, confirming the order of the Commissioner of Income-tax (Appeals) to delete the penalty under section 271(1)(c) for both assessment years.

In conclusion, the Tribunal upheld the deletion of the penalty by the Commissioner of Income-tax (Appeals) for both assessment years, emphasizing the importance of exercising discretion judiciously in penalty imposition cases and considering all relevant circumstances before levying penalties for inaccurate claims by the assessee.