2012 (10) TMI 249 - HC - Income Tax

Penalty u/s 271(1)(c) - booking losses on forward contract tantamounts to furnishing of inaccurate particulars of income - Held that - The assessee had made a claim of loss on account of losses arising on a maturity of the forward contract, which in fact matured during the preceding year i.e. assessment year 2004-05 but were booked as expenditure during the year under consideration on the bank advice received for the aforesaid forward contracts. The said claim being rejected by the Assessing Officer as being not relating to the year under consideration cannot tantamount to furnishing of inaccurate particulars of income. As decided in CIT Versus RELIANCE PETROPRODUCTS FVT. LTD. 2010 (3) TMI 80 - SUPREME COURT a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - no question of law arises in the present appeal as the revenue was unable to show that the assessee had intentionally not furnished correct particulars or the claim made was bad in law - in favour of assessee.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act against deletion of penalty under Section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
1. The appellant, a revenue authority, challenged the deletion of penalty under Section 271(1)(c) by the Income Tax Appellate Tribunal (ITAT) in relation to the assessment year 2005-06. The Tribunal had allowed the appeal filed by the assessee and removed the penalty imposed by the Assessing Officer.
2. The assessee had initially declared an income of Rs. 3,33,49,930/- for the relevant assessment year. However, during the assessment proceedings, an amount of Rs. 85,16,025/- was disallowed by the Assessing Officer, leading to the imposition of a penalty amounting to Rs. 31,16,226/- under Section 271(1)(c) for furnishing inaccurate particulars of income.
3. The Commissioner of Income Tax (Appeals) upheld the penalty, but the ITAT reversed this decision based on the argument that the rejection of the claim did not amount to intentionally furnishing inaccurate particulars of income, citing the decision in Commissioner of Income Tax v. Reliance Petro Products Pvt. Ltd.
4. The Supreme Court's ruling in the Reliance Petro case emphasized that a mere unsustainable claim does not necessarily constitute furnishing inaccurate particulars regarding income. The Court clarified that incorrect claims do not automatically lead to penal consequences under Section 271(1)(c) of the Income Tax Act.
5. The Tribunal found that the forward contracts leading to losses were booked in the assessment year in question based on bank advice received in the preceding year. The rejection of this claim did not establish intentional concealment of income or furnishing inaccurate particulars, as per the principles outlined in the Reliance Petro case.
6. The Tribunal's decision was based on a thorough analysis of the facts and legal precedents, concluding that the revenue failed to demonstrate intentional non-disclosure or provision of inaccurate details by the assessee. Consequently, the appeal by the revenue authority was dismissed due to the absence of any legal error in the ITAT's decision.