2014 (3) TMI 813 - HC - Income Tax

Imposition of penalty u/s 271(1)(c) of the Act Inaccurate particulars furnished for claiming deduction Held that - The assessee in this case furnished inaccurate particulars and sought to avoid liability to pay tax on that basis - It was not a bona fide mistake - The assessee did not establish by any cogent evidence that inaccurate particulars were furnished accidentally or by mistake - deduction was claimed knowingly on a wrong basis thus, penalty was rightly imposed but, the amount of penalty should be reduced by 50% considering that there is nothing to show any antecedent Decided partly in favour of Assessee.

Summary

Issues involved:
1. Appeal against penalty imposed under Section 271(1)(C) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Detailed Analysis:

1. Background: The appellant filed an Income Tax Return for the Assessment year 2007-08 claiming a deduction of Rs. 8,00,000 allegedly paid as interest. The assessing officer found it to be intentional evasion and imposed a penalty of Rs. 2,25,338 under Section 271(1)(C) of the IT Act.

2. Appellant's Argument: The appellant contended that not all errors in the return amount to intentional concealment attracting penalty. Citing a Supreme Court judgment, the appellant argued that incorrect claims do not automatically lead to penalty unless there is deliberate concealment.

3. Respondent's Argument: The respondent argued that the incorrect claim was not accidental, as the appellant did not attempt to justify it. It was asserted that without scrutiny, a significant amount of tax would have been evaded.

4. Court's Decision: The court held that the appellant knowingly furnished inaccurate particulars to avoid tax liability, which was not a bona fide mistake. The claim was made on a wrong basis, leading to the imposition of a penalty. However, considering the lack of antecedent, the penalty was reduced by 50% to Rs. 1,14,000.

5. Judicial Interpretation: The court distinguished the case from the precedent cited by the appellant, emphasizing the deliberate nature of the inaccurate particulars furnished. The judgment clarified that mere incorrect claims, without any accidental or mistaken basis, could attract penalties under Section 271(1)(C).

6. Final Disposition: The court allowed the appeal to the extent of reducing the penalty amount and directed the refund of any excess amount paid by the appellant along with interest. The appeal was disposed of without any order as to costs.

7. Conclusion: The judgment highlights the importance of distinguishing between accidental errors and deliberate attempts to evade tax. It underscores that penalties under Section 271(1)(C) are applicable when inaccurate particulars are furnished knowingly, even if based on incorrect claims, and provides guidance on the appropriate reduction of penalties based on circumstances.