2012 (11) TMI 858 - HC - Income Tax

Imposition of Penalty u/s 271(1)(c) - Conscious and deliberate declaration of income under a wrong head - Whether change of opinion or concealment and furnishing of inaccurate particulars of Income - held that - There was genuine difference of opinion between the assessee and the department regarding the taxing of a particular income ie rent received from letting out properties as to whether it was to be assessed under the head income of house property or income from business and therefore sec 271(1)(c) of the Act was not attracted - findings recorded by the Tribunal are based upon appreciation of evidence and material on record and do not suffer from any legal infirmity - appeal does not give rise to any substantial questions of law - appeal fails and is dismissed.

Summary

Issues:
1. Whether deliberate declaration of income under a wrong head constitutes furnishing inaccurate particulars of income?
2. Whether changing the head of income by the Assessing Officer amounts to furnishing inaccurate particulars of income?

Analysis:
1. The appeal pertains to the Assessment Year 2001-02, where the respondent-assessee, a private limited company engaged in letting out properties and sale of automobiles, disclosed rent income under 'Income From Business.' The Assessing Officer reclassified the income under 'Income From House Property,' initiating penalty proceedings under section 270(1)(c) of the Income Tax Act. The Commissioner of Income Tax (Appeals) allowed the appeal, setting aside the penalty, which was challenged by the Revenue before the Tribunal.

2. The Revenue contended that the deliberate misclassification of income by the assessee constituted furnishing inaccurate particulars of income, attracting penalty under section 271(1)(c) of the Act. However, both the Commissioner of Income Tax (Appeals) and the Tribunal found a genuine difference of opinion between the assessee and the department regarding the proper classification of income. They held that this difference did not attract Explanation (1) to section 271(1)(c) of the Act, as it was a matter of interpretation rather than deliberate concealment.

3. The High Court upheld the Tribunal's decision, stating that the findings were based on evidence and material on record, devoid of legal flaws. The Court concluded that no substantial questions of law arose from the appeal, leading to the dismissal of the appeal. The judgment emphasizes the importance of genuine disputes in tax assessments and the distinction between deliberate concealment and interpretational disagreements in declaring income under different heads.