2012 (9) TMI 649 - AT - Income Tax

Penalty u/s 271(1)(c) - Assessee has taken advance against Deep Discount Bonds Assessee claim interest expense in P&L without deducted TDS During reassessment u/s 147, AO disallow the same AO levy penalty u/s 271(1)(c) on concealment of income Held that - As the assessee is under bonafied belief of CBDT circular no. 4/2004 dated 13.5.2004, TDS was required to be deducted only at the time of redemption. The assessee has bonafied belief not to deduct the same during the intervening period. Therefore, mere non-deduction of tax on the interest will not amount to concealment of income by the assessee. Appeal decide in favour of assessee

Summary

Issues:
- Imposition of penalty u/s 271(1)(c) of the IT Act for furnishing inaccurate particulars of income.

Analysis:
1. Facts of the Case: The appellant, a Special Purpose Vehicle (SPV), filed its original return of income at a loss, which was later assessed at a reduced loss. The Assessing Officer noticed an interest claim on advance against Deep Discount Bonds without TDS deduction, leading to a reassessment and imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.

2. Contentions of the Parties: The appellant argued that there was no concealment as all facts were disclosed in the original return and revised return, with a bona fide belief in interpreting CBDT circulars. The appellant emphasized that non-deduction of TDS was due to a genuine interpretation issue and did not result in revenue loss or tax evasion.

3. Legal Precedents: The appellant cited various judicial decisions to support their argument that penalty for concealment should not apply when the claim was made in good faith and there was no intention to evade taxes. The appellant highlighted the distinction between quantum and penalty proceedings, emphasizing that incorrect claims do not automatically lead to penalty imposition.

4. Judicial Analysis: The ITAT considered the factual matrix of the case, noting that the disallowance of interest expenditure was solely due to non-deduction of TDS. The ITAT referred to the Supreme Court's decision in Reliance Petro Products, stating that making an incorrect claim in law does not amount to furnishing inaccurate particulars. The ITAT found that the non-deduction of tax did not constitute concealment of income, especially when the claim was genuinely made and disallowed based on TDS non-compliance.

5. Conclusion: The ITAT allowed the appeal, ruling in favor of the appellant. The ITAT held that the penalty u/s 271(1)(c) was unjustified as the interest expenditure claim, though disallowed, was made in good faith without any intention to conceal income. The ITAT emphasized that non-deduction of tax at source, in this case, did not warrant penalty imposition, as there was no deliberate attempt to provide inaccurate particulars of income.

This detailed analysis of the judgment highlights the key arguments, legal precedents, and the ITAT's reasoning in allowing the appeal against the penalty imposed under section 271(1)(c) of the IT Act.