2010 (5) TMI 658 - HC - Income Tax

Penalty under section 271(1)(c) of the Act assessee wrongly claimed deduction under section 80-IA - Prior to issue of said notice, assessee had already filed a revised return of income under section 139(5) wherein no claim under section 80-IA was made Held that - assessee had bona fide made a claim for deduction under section 80-IA of the Act, which came to be rectified by filing a revised return withdrawing the claim and that as such there was no concealment or furnishing of inaccurate particulars of income on the part of the assessee In favor of assessee.

Summary

Issues:
1. Applicability of penalty under section 271(1)(c) of the Income-tax Act for wrong claim of deduction under section 80-IA.
2. Consideration of revised return in penalty proceedings for concealment of income.
3. Impact of judicial pronouncements on filing revised return after detection of concealment.

Analysis:

Issue 1:
The appellant-Revenue challenged the deletion of penalty under section 271(1)(c) by the Appellate Tribunal based on the wrong claim of deduction under section 80-IA. The Assessing Officer imposed the penalty, considering the claim as a prima facie wrong claim, leading to the concealment of income. However, the Commissioner (Appeals) and the Tribunal both found that the claim was made under a bona fide belief, rectified by filing a revised return. The Tribunal emphasized that a bona fide claim rectified by a revised return does not attract penalty under section 271(1)(c), as confirmed by judicial precedents.

Issue 2:
The Assessing Officer contended that the revised return filed by the assessee after being informed of the wrong claim should not absolve them from penalty for concealment. However, both the Commissioner (Appeals) and the Tribunal held that the revised return was filed voluntarily before any investigation or detection of concealment by the department. They concluded that the rectification through a revised return based on a bona fide belief does not warrant a penalty under section 271(1)(c).

Issue 3:
The appellant-Revenue relied on various judicial pronouncements to argue that filing a revised return after concealment is detected should not absolve the assessee from penalty. However, the Tribunal distinguished the present case by highlighting the bona fide belief of the assessee in claiming the deduction under section 80-IA, which was rectified through a revised return. The Tribunal's decision was in line with the principle that inadvertent errors rectified by revised returns do not attract penalties for concealment.

In conclusion, both the Commissioner (Appeals) and the Tribunal found that the assessee's claim under section 80-IA was made in good faith and rectified promptly through a revised return, absolving them from the penalty under section 271(1)(c). The judgment emphasized the importance of bona fide belief and voluntary rectification in determining the liability for penalties under the Income-tax Act.