2013 (2) TMI 49 - HC - Income Tax

Penalties u/s 271(1)(c) - deduction claimed u/s 80-IB was ultimately allowed at a lower level - Held that - Mere making of a claim which is ultimately held not to be sustainable in law, would not amount to furnishing inaccurate particulars regarding the income of an assessee. In the present appeals it is only that the claims of deduction under Section 80IB have been downscaled. This, by itself, would not mean that it is a case of furnishing inaccurate particulars of income. See CIT v. Reliance Petroproducts (P) Ltd 2010 (3) TMI 80 - SUPREME COURT - in favour of assessee.

Summary

Issues: Penalties under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2003-04 and 2004-05.

Analysis:
In the case at hand, the penalties under section 271(1)(c) of the Income Tax Act, 1961 were imposed on the respondent-assessee for claiming deductions under section 80-IB that were ultimately allowed at a lower level. Specifically, for the assessment year 2003-04, the assessee initially claimed a deduction of Rs.2,52,41,632/- under section 80-IB, which was later revised to Rs.2,67,48,176/-. However, the final computation by the assessing officer retained the deduction at the original amount claimed, resulting in a penalty due to the discrepancy in the revised claim. Similar circumstances were observed for the assessment year 2004-05, leading to penalties being imposed by the assessing officer.

The Commissioner of Income Tax (Appeals) had previously deleted the penalties, prompting the revenue to appeal before the Tribunal. The Tribunal, after evaluating the facts and referring to the Supreme Court decision in Commissioner of Income Tax v. Reliance Petroproducts (P) Ltd., highlighted the distinction between inaccurate particulars and unsustainable claims. The Supreme Court's ruling emphasized that the mere making of a claim that is later deemed unsustainable in law does not constitute furnishing inaccurate particulars regarding the income of the assessee. It was clarified that a claim that is not legally sustainable does not automatically imply inaccurate particulars.

The Tribunal, in alignment with the Supreme Court's decision, concluded that the downsizing of the deduction claims under Section 80-IB did not amount to furnishing inaccurate particulars of income. Moreover, the absence of findings in the penalty order regarding the specific income concealed or the particular facet of income with inaccurate particulars further supported the Tribunal's decision. Consequently, the High Court dismissed the appeals, stating that no substantial question of law arose for consideration in these matters, affirming the Tribunal's application of the legal principles established by the Supreme Court.