2013 (5) TMI 195 - AT - Income Tax

Penalty u/s 271(1) (c) - CIT(A) deleted the penalty levy - whether claiming excessive deductions also amount to concealment of income? - Held that - It is a case of wrong claim because a part of the development expenditure has been allowed by the AO as revenue and remaining major part of the claim has been held as capital expenditure on which depreciation has been allowed to the assessee. Accordingly, CIT(A) rightly held that the assessee has neither concealed its particulars of income nor provided inaccurate particulars of income as far as the claiming of these expenses is concerned. It is clearly a case of claiming certain expenses in a bona fide manner which had been disallowed by AO and AO has not been able to make out a case for imposition of penalty u/s 271(1)(c). See Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein held that a mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars - Against revenue.

Summary

Issues:
- Appeal against order of Commissioner of Income Tax imposing penalty under section 271(1)(c) of the Income Tax Act, 1961.
- Whether excessive deductions claimed by the assessee amount to concealment of income or furnishing inaccurate particulars of income.

Analysis:
1. The appeal was filed by the revenue against the order of the Commissioner of Income Tax imposing a penalty under section 271(1)(c) of the Income Tax Act, 1961. The grounds raised by the revenue in the appeal included the deletion of penalty imposed by the Assessing Officer and the failure to appreciate that claiming excessive deductions also amounts to concealment of income as per judicial pronouncements.

2. The facts leading to the appeal involved the assessee initially filing a return of income declaring a loss, claiming the status of a local authority. However, due to amendments in the Act, the status was denied, and the assessment was completed considering the assessee as a "firm." Various expenses were disallowed during the assessment proceedings. The appellant appealed to the Commissioner of Income Tax(A) and obtained partial relief. The matter was further appealed to the ITAT, resulting in additional relief. The final assessment was completed by the Assessing Officer. Penalty proceedings were initiated under section 271(1)(c) by the Assessing Officer.

3. The Assessing Officer imposed a penalty on the appellant, alleging inaccurate particulars of income. The appellant contended that they had not concealed income or furnished inaccurate particulars. The appellant relied on a judgment of the Supreme Court to support their argument. The case revolved around the interpretation of the term "particulars" under section 271(1)(c) and the distinction between incorrect claims and inaccurate particulars.

4. The arguments presented by both parties were considered. The revenue contended that excessive deductions claimed by the assessee amounted to concealment of income, citing judicial precedents. The counsel for the assessee argued that the case was a result of a wrong claim and not concealment or furnishing inaccurate particulars. The judgment in the case of Reliance Petroproducts was pivotal in determining the outcome.

5. The ITAT carefully analyzed the facts and held that the disallowed claim was a case of wrong claim rather than concealment or inaccurate particulars. The development expenditure claimed by the assessee was partially allowed as revenue by the Assessing Officer, indicating a misunderstanding by the assessee. The ITAT agreed with the Commissioner of Income Tax(A) that there was no concealment or inaccurate particulars in this case.

6. Ultimately, the ITAT concluded that the claim of expenses was made in good faith but disallowed by the Assessing Officer. The decision to delete the penalty order by the Commissioner of Income Tax(A) was upheld based on sound legal principles and the judgment of Reliance Petroproducts. The appeal of the revenue was deemed devoid of merits and dismissed.

7. In conclusion, the ITAT dismissed the appeal of the revenue, affirming the decision of the Commissioner of Income Tax to delete the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.