2014 (6) TMI 703 - AT - Income Tax

Deletion of penalty u/s 271(1)(c) of the Act Inaccurate claim of interest Held that - Following CIT Vs. Reliance Petroproducts Pvt.Ltd. 2010 (3) TMI 80 - SUPREME COURT - even if there is a wrong claim of deduction, it will not amount to concealment of income - a mere making of a claim which in the opinion of the AO is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee - The assessee is a government undertaking which is running in huge losses year after year - the assessed loss by the AO is more than a thousand crore - when the assessee has accepted the assessment order and did not file any appeal, it cannot be presumed that assessee has admitted that the disallowance of interest was correct - even if the disallowance of interest is correct, that, per-se, will not make the assessee liable for penalty u/s 271(1)(c) because, for penalty to get attracted, the conditions stipulated in the concerned provisions are required to be fulfilled Decided against Revenue.

Summary

Issues Involved:
1. Whether the CIT(A) was correct in deleting the penalty u/s 271(1)(c) of the IT Act, 1961 for the inaccurate claim of interest related to capital expenditure.
2. Whether the CIT(A) was correct in deleting the penalty u/s 271(1)(c) when the quantum addition was accepted by the assessee without filing an appeal.
3. Whether the CIT(A) erred in not considering the lack of response from the assessee to the show cause letter.
4. Whether the CIT(A) was justified in relying on irrelevant case laws.

Analysis:

Issue 1:
The appellant, a government undertaking, declared a total loss for the year under consideration. The Assessing Officer disallowed interest claimed by the appellant under Section 36(1)(iii) of the Act, resulting in a penalty under Section 271(1)(c). The CIT(A) canceled the penalty, leading to the Revenue's appeal. The CIT(A) based the decision on the argument that the claim was not found to be incorrect or false, following the decision in Reliance Petroproducts Pvt. Ltd. The appellant's counsel emphasized that the claim was made based on genuine belief and all relevant facts were disclosed to the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, stating that the mere unsustainable claim does not amount to furnishing inaccurate particulars.

Issue 2:
The CIT(A) correctly deleted the penalty under Section 271(1)(c) even though the quantum addition was accepted by the assessee without filing an appeal. The Tribunal emphasized that the absence of a finding that the return details were incorrect or false precludes the imposition of a penalty. The Tribunal cited the case of Mahanagar Telephone Nigam Ltd., where it was held that the denial of claims does not automatically imply inaccurate particulars. Therefore, the Tribunal dismissed the Revenue's appeal based on the lack of inaccurate information in the return.

Issue 3:
The CIT(A) did not err in deleting the penalty despite the lack of response from the assessee to the show cause letter. The Tribunal reiterated that the absence of a finding of incorrect details in the return prevents the imposition of a penalty under Section 271(1)(c). The Tribunal upheld the CIT(A)'s decision based on the principle that a mere unsustainable claim does not constitute furnishing inaccurate particulars regarding income.

Issue 4:
The CIT(A) was justified in relying on relevant case laws to support the decision to delete the penalty under Section 271(1)(c). The Tribunal cited the decisions of the Hon'ble Apex Court and the Hon'ble Jurisdictional High Court to establish that the appellant's actions did not amount to concealing income or furnishing inaccurate particulars. The Tribunal upheld the CIT(A)'s decision based on the legal principles established in the cited cases.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the penalty under Section 271(1)(c) based on the lack of inaccurate particulars furnished by the assessee.