2013 (8) TMI 496 - AT - Income Tax

Penalty to be levied u/s 271(1)(c) of the Income Tax Mens rea is not present Held that - Making an incorrect claim does not tantamount to furnishing inaccurate particulars and that to attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous - Facts reveal that details supplied by the assessee did not fall in any of these categories Delete the penalties u/s 271(1)(c) Decided in favor of Assessee.

Summary

Issues:
Confirmation of penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2004-05.

Analysis:
The appeals were filed against orders of CIT(A)-25, Mumbai confirming the levy of penalty under section 271(1)(c) of the Act. The common issue in all appeals was addressed collectively for convenience. The specific appeal in question was against the penalty of Rs.68,00,000 imposed by the Assessing Officer under section 271(1)(c) of the Act. The AO disallowed the long term capital loss of US 64 amounting to Rs.3.08 Crores declared by the assessee, leading to penalty proceedings. The AO and FAA held that the loss from an exempt source could not be set off against income from another source under the same head. The penalty was imposed based on the decision in the case of Dharmendra Textiles & Others, emphasizing that mens rea was not essential for section 271(1)(c) of the Act.

In the appeal before the FAA, it was noted that the Finance Act, 2003 introduced section 10(33) exempting income on transfer of units of US 64. The FAA rejected the claim of the assessee regarding the set off and carry forward of capital loss on US 64, stating that any loss from an exempt source should be ignored for set off purposes. The FAA concluded that the assessee's claim was made with the intention of reducing tax liability, constituting inaccurate particulars under section 271(1)(c) of the Act.

During the proceedings, the AR argued that the claim of set off was disclosed in the return of income and should not be equated with concealment of income. The AR emphasized that even if a wrong claim was made, it should not result in a penalty. The Tribunal observed that the assessee had provided all details about the sale of units of US 64, and the AO had collected this information from the filed return. The Tribunal held that making an incorrect claim does not amount to furnishing inaccurate particulars, emphasizing that incorrect claims do not automatically attract penalties under section 271(1)(c) of the Act.

Consequently, the Tribunal concluded that the penalty imposed by the AO and upheld by the FAA could not be endorsed. It was established that the details provided by the assessee were not inaccurate, incorrect, or according to the truth, thus not warranting a penalty. The Tribunal ruled in favor of the assessee, allowing the appeal and deleting the penalty under section 271(1)(c) of the Act. The penalties imposed on the other two appellants were also deleted following the same reasoning as the initial case.

In conclusion, the Tribunal found that the incorrect claim made by the assessee did not constitute furnishing inaccurate particulars of income, leading to the deletion of the penalties imposed by the authorities.