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2013 (9) TMI 735 - HC - Income TaxPenalty u/s 271(1)(c) of the Income Tax Act Held that - Reliance has been placed upon the judgment in the case of Reliance Petro Products case 2010 (3) TMI 80 - SUPREME COURT , wherein the Hon ble Supreme Court has held that mere raising of a claim, even if not sustainable in law, is not by itself, sufficient to hold that it denotes furnishing of inaccurate particulars with an intent as would invite a penalty In the present case, deductions were claimed in a bona fide exercise of the right of an assessee to claim deduction. The fact that this claim was rejected, does not raise inference of a mala fide attempt to evade tax. A penalty is imposed only if the claim is mala fide or raised with intent to evade tax Decided against the Revenue.
Issues:
1. Impugning order deleting penalty imposed by Assessing Officer 2. Applicability of judgments in penalty proceedings 3. Interpretation of Section 271(1)(c) of the Income Tax Act, 1961 4. Bona fide nature of deduction claims affecting penalty imposition Issue 1: Impugning order deleting penalty imposed by Assessing Officer The revenue challenged the order deleting the penalty imposed by the Assessing Officer, which was affirmed by the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals). The appellant contended that the penalty was wrongly set aside based on a judgment of the Supreme Court and argued that the case was covered against the assessee by a judgment of the Delhi High Court. The questions raised included the correctness of upholding the penalty deletion, the effect of claiming a deduction without fulfilling basic conditions, and whether a wrong deduction claim could be attributed to a bona fide mistake. The High Court found no reason to entertain the appeal or consider the questions of law raised by the appellant. Issue 2: Applicability of judgments in penalty proceedings The Commissioner of Income Tax (Appeals) allowed the assessee's appeal by holding that a finding in the assessment order does not conclusively determine penalty imposition. Citing various judicial decisions, including the Supreme Court's ruling in Reliance Petro Products Pvt. Ltd., it was emphasized that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income. The Income Tax Appellate Authority dismissed the revenue's appeal, stating that the facts of the case aligned with the Supreme Court's decision in Reliance Petro Products Pvt. Ltd. and upheld the penalty deletion based on relevant legal precedents. The High Court rejected the revenue's contention that the claim for deduction was not bona fide, emphasizing that the claim was made in good faith and the rejection did not imply an intent to evade tax. Issue 3: Interpretation of Section 271(1)(c) of the Income Tax Act, 1961 The High Court analyzed the scope of penalty under Section 271(1)(c) of the Income Tax Act, referring to the Supreme Court's ruling in Reliance Petro Products Pvt. Ltd. The Court held that merely raising a claim, even if legally unsustainable, does not automatically attract a penalty for furnishing inaccurate particulars. Additionally, the Court noted the Delhi High Court's stance in Zoom Communication Private Limited's case, highlighting the importance of explaining deductions claimed to avoid penalties. However, in the present case, the Court found that the deductions were legitimately claimed and rejected, without indicating any mala fide intent to evade tax, thereby dismissing the appeal against the penalty deletion. Issue 4: Bona fide nature of deduction claims affecting penalty imposition The High Court emphasized the importance of distinguishing between bona fide deduction claims and mala fide attempts to evade tax when considering penalty imposition under Section 271(1)(c). It reiterated that a rejected claim does not automatically imply inaccuracies in income particulars or an intent to evade tax. In this case, the Court found that the deductions were legitimately claimed by the assessee and rejected without any evidence of mala fide intentions. Consequently, the Court dismissed the appeal, concluding that the penalty was not warranted based on the facts and circumstances of the case.
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