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2012 (12) TMI 336 - AT - Income TaxPenalty u/s 271(1)(c) Whether mere submitting a claim which is incorrect in law would amounts to concealment of income Assessee earn dividend from UTI MIP and claim exemption of such amount u/s 10(15) - After pointed out by AO, assessee admitted said income AO made addition of said dividend income and levy penalty u/s 271(1)(c) - Held that - Following the decision in case of Zoom Communication Pvt. Ltd (2010 (5) TMI 34 - DELHI HIGH COURT) held that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. In favour of revenue
Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act. 2. Validity of the claim of exempt dividend income by the assessee. 3. Assessment of the assessee's explanation for the incorrect claim as a bona fide mistake. 4. Applicability of case precedents in determining the legitimacy of the penalty. Detailed Analysis: 1. Legitimacy of the penalty levied under Section 271(1)(c) of the Income Tax Act: The appeal revolves around the penalty imposed on the assessee under Section 271(1)(c) for the assessment year 2003-2004. The penalty was levied due to the disallowance of depreciation on lease assets and the addition of Rs. 4,66,52,000/- on account of the claim of exempt income. The CIT (A) deleted the penalty regarding the depreciation claim but confirmed it concerning the claim of dividend income as exempt. The penalty amount was adjusted to Rs. 1,70,37,168/- after relief granted by the CIT (A). 2. Validity of the claim of exempt dividend income by the assessee: The assessee, a banking company, claimed a deduction of Rs. 9,30,11,643/- as exempt interest under Section 10(15). However, the Assessing Officer (AO) found that Rs. 4,66,52,000/- of this amount was dividend income from UTI MIP, which was not exempt for the assessment year 2003-2004. The assessee admitted this mistake only after the AO pointed it out, leading to the imposition of the penalty. 3. Assessment of the assessee's explanation for the incorrect claim as a bona fide mistake: The assessee argued that the incorrect claim was a bona fide mistake due to changes in the law and that the dividend income was exempt in prior and subsequent years. The assessee cited several case laws to support this argument. However, the learned DR contended that the mistake was deliberate, highlighting that the assessee, being a banking company with professional assistance, should have been aware of the changes in the law. The DR emphasized that the assessee did not file a revised return even after the AO's query, indicating a lack of bona fide intention. 4. Applicability of case precedents in determining the legitimacy of the penalty: The Tribunal considered the case precedents cited by both parties. The assessee relied on decisions like Sunilchandra Vohra vs. ACIT and CIT vs. Siddhartha Enterprises, arguing that the mistake was bona fide. Conversely, the learned DR cited CIT vs. Zoom Communication Pvt. Ltd., where the court held that a claim must be bona fide to avoid penalty under Section 271(1)(c). The Tribunal found that the assessee's claim was patently illegal and unsustainable, and the explanation was not bona fide. The Tribunal upheld the penalty, aligning with the decision in CIT vs. Zoom Communication Pvt. Ltd., which emphasized that incorrect claims without a bona fide basis attract penalties. Conclusion: The Tribunal dismissed the appeal, confirming the penalty of Rs. 1,70,37,168/- under Section 271(1)(c). The decision was based on the finding that the assessee's claim of exempt dividend income was not bona fide and was contrary to the provisions of the law. The Tribunal emphasized that the assessee, being a banking company with professional assistance, should have been aware of the legal changes, and the explanation provided did not justify the incorrect claim.
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