2012 (12) TMI 992 - AT - Income Tax

Penalty u/s 271(1)(c) - CIT(A) deleted the penalty - Held that - This is not a fit case for levying penalty as in this case neither the assessee has concealed the particulars of income nor has furnished inaccurate particulars of income. This is simply a case of bonafide mistake which has occurred due to change of law applicable in this year. The assessee had been claiming and was being allowed similar claims of deductions in earlier Assessment Years also. After giving our thoughtful consideration to the facts of this case vis-a-vis the legal position narrated above, we are of the considered opinion that when a wrong claim is made under some bonafide mistake, that cannot be a ground for imposition for penalty u/s 271(1)(c) of the Act. The assessee has been making similar claim and the same were being allowed in earlier assessment years. Due to sudden change in law, this claim was not allowed and the assessee also corrected its mistake by fling a revised return, it is not a case of willful wrong claim. Therefore, we do not find any mistake in the order of the ld. CIT(A) and confirm the deletion of impugned penalty. - Decided in favour of assessee.

Summary

Issues:
Whether deletion of penalty by the ld. CIT(A) of Rs. 93,70,500/- imposed u/s 271(1)(c) of the Income-tax Act, 1961 is justified.

Analysis:

1. Background and Penalty Initiation:
The appeal pertains to the Assessment year 2007-08 regarding the deletion of penalty by the ld. CIT(A) of Rs. 93,70,500/- imposed u/s 271(1)(c) of the Income-tax Act. The penalty was initiated due to the assessee's claim of deductions under section 80P(2) of the Act, which were disallowed by the Assessing Officer (A.O) due to a change in law rendering the assessee ineligible for the deduction.

2. Factual Circumstances:
The assessee, a cooperative society engaged in banking, claimed deductions under section 80P(2) in line with previous years. However, a change in law made the assessee ineligible for these deductions in the year under consideration. The assessee rectified the mistake by filing a revised return and paying the additional tax to avoid further disputes.

3. Legal Position on Penalty Imposition:
The judgment delves into the legal framework of penalty imposition under section 271(1)(c) of the Act. It emphasizes that the mere act of concealment or furnishing inaccurate particulars does not automatically lead to penalty imposition. The Supreme Court rulings highlight that incorrect claims, if made in good faith, do not amount to furnishing inaccurate particulars, thus not warranting a penalty.

4. Judicial Interpretation and Decision:
After thorough analysis, the tribunal concluded that the case did not warrant a penalty under section 271(1)(c) as there was no deliberate concealment or furnishing of inaccurate particulars. The mistake was deemed to be a bonafide error due to the change in law, and the assessee promptly rectified it upon realization. The tribunal upheld the deletion of the penalty by the ld. CIT(A) based on the legal principles discussed and dismissed the revenue's appeal.

5. Final Decision:
The tribunal dismissed the appeal of the revenue, affirming the deletion of the penalty by the ld. CIT(A) as the case did not involve deliberate concealment or furnishing of inaccurate particulars. The judgment was pronounced on 17th December 2012, emphasizing the importance of distinguishing between genuine mistakes and willful misconduct in penalty proceedings.