2011 (10) TMI 636 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The penalty is levied for furnishing of inaccurate particulars, and that there is nothing to indicate incorrectness of particulars of claim of deduction on the facts of this case, we are of the considered view that the impugned penalty, to the extent of ₹ 1,21,255, levied by the AO and sustained by the CIT(A) deserves to be deleted. We, accordingly, direct the AO to delete the penalty imposed on the assessee.

Summary

Issues:
Penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
The appeal was against the penalty of Rs. 1,21,255 imposed under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2006-07. The Assessing Officer disallowed certain deductions claimed by the assessee, totaling Rs. 4,82,924, and initiated penalty proceedings. The CIT(A) upheld the penalty, leading to the further appeal. The Tribunal considered whether the penalty was justified for furnishing inaccurate particulars of income.

The Tribunal noted that the penalty was imposed on the grounds of inaccurate particulars of income. However, the assessee had agreed to the disallowances made by the Assessing Officer during the assessment proceedings. Citing the case of CIT vs. Reliance Petroproducts, the Tribunal emphasized that merely making unsustainable claims does not amount to furnishing inaccurate particulars of income. The Tribunal also considered the leniency required for small disallowances and found no indication of incorrectness in the particulars of the deduction claimed by the assessee. Therefore, the Tribunal concluded that the penalty of Rs. 1,21,255 should be deleted as it was not justified in this case.

In its decision, the Tribunal allowed the appeal and directed the Assessing Officer to delete the penalty imposed on the assessee. The judgment was pronounced on 19th October 2011 by the Tribunal consisting of Shri D.Manmohan, Vice President, and Pramod Kumar, Accountant Member.