2013 (7) TMI 412 - AT - Income Tax

Penalty u/s 271(1)(c) - as per AO income from commission/consultancy etc. received from his employer is business income instead of salary income - CIT(A) deleted the penalty as the corresponding addition made to the total income of the assessee was merely as a result of change of head of income - Held that - As decided in case of Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT merely making a claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. As noted by the CIT(A) in his impugned orders that full disclosure was made by the assessee regarding the nature of his income which was also reflected in the certificate issued by the employer. Even the genuineness of the expenditure claimed to be incurred by the assessee for earning commission income etc. was not doubted by the A.O. The assessee thus cannot be said to be guilty of furnishing inaccurate particulars of his income - In favour of assessee.

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Income Tax Act, 1961 for inaccurate particulars of income disclosure.

Analysis:
The appeal was filed by the Revenue against the cancellation of a penalty imposed by the Assessing Officer (A.O.) under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2006-07. The penalty was imposed on the assessee, an individual, for showing income from consultancy/commission as business income instead of salary income. The A.O. considered this as inaccurate particulars of income disclosure and initiated penalty proceedings. The assessee admitted the mistake, revised the computation of income, and paid the full tax liability before the due date. However, the A.O. imposed a penalty of Rs. 6,12,272, being 100% of the tax sought to be evaded.

The assessee challenged the penalty before the Commissioner of Income Tax (Appeals) [CIT(A)], who canceled the penalty. The CIT(A) noted that the assessee had disclosed the nature of income and the corresponding TDS certificate mentioned the payment as consultancy and dalali. Genuine expenses were also disclosed, and the assessee maintained a separate establishment for the commission business. The CIT(A) observed that there was no presumption of splitting salary income into salary and commission. The CIT(A) concluded that there was only a change of head of income, which was accepted by the assessee.

During the appeal before the Appellate Tribunal, it was argued that the assessee furnished inaccurate particulars of income by misrepresenting the nature of income. However, the Tribunal referred to the case of Reliance Petroproducts Pvt. Ltd. where the Supreme Court held that making an incorrect claim, not sustainable in law, does not amount to furnishing inaccurate particulars. The Tribunal found that the assessee made full disclosure regarding the income nature, and the expenses were not doubted. As the disclosure was not inaccurate and the addition to income was due to a change in the head of income, the Tribunal upheld the CIT(A)'s decision to cancel the penalty.

Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the cancellation of the penalty imposed by the A.O. under section 271(1)(c) of the Income Tax Act, 1961.