2012 (8) TMI 764 - AT - Income Tax

Penalty u/s 271(1)(c) - deduction u/s 80-IB claimed even after the expiry of 10 consecutive AYs - withdrawal of claim u/s 80IB suo-moto by filing revised statement of income during assessment proceeding and payment of requisite tax voluntarily - Held that - Assessee has disclosed all the necessary particulars in the return. The assessee was allowed the deduction u/s 80-IB in the earlier years and accordingly it claimed deduction. The moment the assessee has taken legal advice, he withdrew the claim by paying the taxes due on withdrawal of the claim suo mottu and voluntarily. The bona fide of making the claim for deduction u/s 80-IB and withdrawal thereof, is duly proved. Inaccurate particulars means that particulars have not been furnished in correct/exact manner as is required to be furnished to determine the correct income chargeable to tax. A mere making of claim, which is not sustainable in law, by itself, will not amounting to furnishing inaccurate particulars regarding income of assessee - more particularly in present case of respondent wherein the claim of deduction u/s 80-IB was withdrawn and tax duly paid on the same. CIT (A) is justified in deleting the penalty - Decided against Revenue

Summary

Issues Involved:
1. Whether the CIT(A) erred in deleting the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act.
2. Whether the assessee's failure to file a revised return and only filing a revised statement of income impacts the penalty.
3. Whether the penalty proceedings were initiated and levied correctly under the provisions of section 271(1)(c).

Issue-wise Detailed Analysis:

1. Deletion of Penalty by CIT(A):
The CIT(A) deleted the penalty imposed by the AO, observing that the assessee claimed the deduction u/s 80-IB inadvertently and not with the intention to evade tax. The CIT(A) noted that the assessee had shown the deduction as Nil in the audit report and paid taxes before the notice under section 143(2) was issued. The CIT(A) relied on the Supreme Court's decision in Reliance Petroproducts, which stated that making an incorrect claim does not amount to furnishing inaccurate particulars. The CIT(A) also referenced the Bombay High Court's decision in CIT v. Dharmachand L Shah, emphasizing that penalty proceedings are quasi-criminal and separate from assessment proceedings.

2. Impact of Not Filing Revised Return:
The department argued that the assessee did not file a revised return but only a revised statement of income after the notice u/s 143(2) was issued. The department cited the Supreme Court's decision in Union of India v. Dharmendra Textiles Processors, asserting that penalty is automatic and mandatory. However, the assessee contended that the revised statement was prepared and taxes were paid before the notice was issued, and the delay in filing was due to advice from their consultant. The assessee argued that there was no concealment or furnishing of inaccurate particulars, as all necessary details were disclosed in the return.

3. Correctness of Penalty Proceedings:
The tribunal found that the AO did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The tribunal emphasized that penalty proceedings require clear findings on the specific charge. The tribunal noted that the AO's direction to issue a penalty notice did not constitute satisfaction required under section 271(1)(c). The tribunal referenced several decisions, including CIT v. Reliance Petroproducts and New Sorathia Engg. Co. v. CIT, which held that mere rejection of a claim does not amount to furnishing inaccurate particulars. The tribunal concluded that the AO's penalty order lacked the necessary satisfaction and specific charge, making the penalty unsustainable.

Conclusion:
The tribunal dismissed the department's appeal, upholding the CIT(A)'s decision to delete the penalty. The tribunal reiterated that penalty under section 271(1)(c) is not automatic and requires clear satisfaction and specific findings on the charge of concealment or furnishing inaccurate particulars. The tribunal emphasized that the assessee had disclosed all necessary particulars and acted in good faith by withdrawing the claim and paying the taxes voluntarily.