2014 (3) TMI 889 - AT - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Scope of saving provisions of section 273 of the act - Held that - The first appellate authority has passed a well-reasoned order by following the order in the case of CIT v. Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT - by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars - A mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars - the assessee has accepted the addition made by the revenue authority and made the payment of tax also - the assessee has not filed its false claim in the return of income it may be incorrect claim but not false claim thus, the penalty is not sustainable - the order of the FAA upheld Decided against Revenue.

Issues:
1. Penalty under Section 271(1)(c) for inaccurate particulars of income.
2. Applicability of saving provision under Section 273 of the Income Tax Act.
3. Correctness of the penalty deletion by the first appellate authority.

Issue 1: Penalty under Section 271(1)(c) for inaccurate particulars of income:
The Revenue appealed against the deletion of penalty under Section 271(1)(c) by the CIT(A) for the assessment year 2007-08. The Assessing Officer had imposed a penalty of Rs. 3,94,378/- due to the assessee claiming deductions that were legally not available, leading to inaccurate particulars of income. The Revenue contended that the penalty was justified as the assessee had furnished inaccurate particulars by claiming wrong deductions. The CIT(A) deleted the penalty, emphasizing that the assessee's actions did not amount to concealment as per the decision in Reliance Petro Products Ltd. case. The Tribunal upheld the CIT(A)'s decision, stating that making an incorrect claim in law does not necessarily constitute furnishing inaccurate particulars, as held in the Reliance Petro Products Ltd. case.

Issue 2: Applicability of saving provision under Section 273 of the Income Tax Act:
The Revenue argued that the saving provision under Section 273 was not applicable in cases where penalty is leviable under Section 271(1)(c). However, the CIT(A) and the Tribunal found that the assessee had successfully explained reasonable causes for the inaccuracies, falling under the saving provisions of Section 273B. The Tribunal noted that the assessee's errors were based on the auditor's report and the bona fide nature of the claims, leading to the cancellation of the penalty under Section 271(1)(c).

Issue 3: Correctness of the penalty deletion by the first appellate authority:
The Tribunal thoroughly analyzed the findings of the CIT(A) and the arguments presented by both parties. It highlighted the reliance on the Supreme Court's decision in the Reliance Petro Products Ltd. case, emphasizing that an incorrect claim in law does not amount to furnishing inaccurate particulars. The Tribunal agreed with the CIT(A)'s reasoning and dismissed the Revenue's appeal, upholding the deletion of the penalty. It concluded that the penalty was not sustainable based on the facts and legal precedents cited, ultimately affirming the CIT(A)'s decision.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty under Section 271(1)(c) for inaccurate particulars of income, citing the legal principles established in the Reliance Petro Products Ltd. case. The Tribunal also found the assessee's explanations to fall under the saving provisions of Section 273, leading to the cancellation of the penalty. The decision was based on a thorough analysis of the facts, legal arguments, and relevant judicial precedents, ultimately dismissing the Revenue's appeal.

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