2014 (7) TMI 350 - HC - Income Tax

Penalty u/s 271(1)(c) of the Act Filing of inaccurate particulars claim for liquidated damages - Held that - The Tribunal s reasoning which accepts the assessee s contentions with a further rationale that it could have committed a silly mistake, is unsustainable - There was no material on the record to support the assessee s return which claimed an allowance on the basis that the total quantity to be supplied was 3 lakh MT - The first explanation that the figure included the moisture content, is not borne out from the record - it also does not appear to be a part of any condition agreed to between the parties - Commissioner who had occasion to go into the aspect, found it to be untrue there was no infirmity with the conclusion of the AO and subsequently the Commissioner that the claim for liquidated damages on the basis that 3 lakhs MT were to be supplied, amounted to furnishing inaccurate particulars - The explanation given by the respondent assessee cannot by any stretch of imagination be termed as bona fide so as to escape the mischief of Section 271 (1) (c) of the Act - the order is set aside Decided in favour of Revenue.

Summary

Issues:
- Tribunal's error in directing deletion of penalty under Section 271(1)(c) of the Income Tax Act based on inaccurate particulars filed by the assessee.

Analysis:
1. The respondent/assessee failed to appear, leading to the Court setting them down ex parte. The main issue raised was whether the Tribunal erred in deleting the penalty imposed on the assessee for filing inaccurate particulars under Section 271(1)(c) of the Income Tax Act.

2. The assessee filed its return for the AY 2008-09, claiming an allowance for liquidated damages under a specific clause in a contract with Golden World Enterprises Limited. The AO disallowed part of the claimed allowance, leading to a penalty imposition under Section 271. The Tribunal directed the deletion of the penalty, citing inadvertent computation mistake through oversight by the assessee.

3. Upon review, the High Court found the Tribunal's reasoning unsustainable. The Court noted that the assessee's claim was based on a total quantity of 3 lakh MT to be supplied, which was not supported by the agreement. The Court rejected the assessee's explanation of oversight and upheld the penalty imposition, ruling that the claim for liquidated damages on the basis of supplying 3 lakhs MT constituted inaccurate particulars under Section 271(1)(c).

4. The Court emphasized that the assessee's explanation was not bona fide and did not have any basis in the agreement or supporting documents. The Commissioner's findings also supported the conclusion that the claim for liquidated damages was based on inaccurate particulars. Consequently, the Court set aside the Tribunal's decision, ruling in favor of the Revenue and against the assessee. The appeal was allowed, affirming the penalty imposition under Section 271(1)(c) of the Income Tax Act.