2013 (12) TMI 1316 - HC - Income Tax

Penalty u/s 271(1)(c) - Held that - The bald allegations against the counsel do not lend credence to the story of the assessee - He had not only made claim for false refund but had also received the refund and encashed it - If he was cheated, he should have been made complaint against the counsel - He did not make any complaint or refer the matter to any of the authorities to investigate the offence - The Tribunal has further found that the circumstance of the case shows that the assessee had connived with his Advocate - He not only claimed and filed false return but also received and encashed it - The Tribunal has rightly found that if he had voluntarily returned the amount, he could have proved the benefits - The imposition of penalty does not suffer from any error of law - Decided against assessee.

Summary

Issues:
1. Whether the ITAT was correct in confirming the penalty for not making full and true disclosure of income and furnishing inaccurate particulars due to a false claim of deduction made by the counsel without the appellant's knowledge?
2. Whether the ITAT was justified in not considering the Commissioner's press release inviting assesses who wrongly claimed refunds to avail waiver of penalty u/s 273A, leading the appellant to expect no penalty under section 271(1)(c)?

Issue 1:
The appellant filed a return claiming a refund based on interest on a housing loan, which was found to be significantly higher than the amount shown in Form 16. The assessing officer issued a notice under Section 154 to rectify the claim. The appellant alleged that the false claim was made by the counsel without his knowledge. The CIT (A) noted the appellant's voluntary retirement and various deductions, leading to the refund. The Tribunal accepted the appellant's claim of being cheated by the counsel and canceled the penalty under section 271(1)(c). However, the ITAT found the appellant's story lacked credibility, as he had not reported the alleged fraud or taken any action against the counsel. The Tribunal concluded that the appellant had connived with the counsel, leading to the imposition of a penalty at the minimum rate.

Issue 2:
The appellant argued that the press release by the Commissioner created a legitimate expectation of no penalty under section 271(1)(c). The Tribunal dismissed this argument, stating that the appellant's voluntary return of the amount only after being cornered did not prove his bona fides. The ITAT found no error in imposing the penalty, as the appellant failed to demonstrate the benefits of voluntarily returning the amount. The High Court upheld the ITAT's decision, emphasizing that the penalty was justified based on detailed factual findings, rendering the questions of law irrelevant under Section 260A of the Act.

In conclusion, the High Court dismissed the income tax appeal, affirming the ITAT's decision to impose the penalty, as the appellant's claims of being cheated and the legitimate expectation of no penalty were not found to be substantiated.