2015 (6) TMI 494 - AT - Income Tax

Penalty u/s 271(1)(c) - CIT(A) cancelled penalty levy - disallowance u/s 14A - Held that - Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under Section 271 (l)(c). A mere making of a claim, which is not sustainable in law by itself will not amount to furnishing inaccurateparticulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.See Commissioner of Income tax vs. Reliance Petroproducts Pvt. Ltd. reported in 2010 (3) TMI 80 - SUPREME COURT Thus in the present case, the penalty under section 271(1)(c) is not leviable and it deserves to be deleted, hence, Ld. CIT(A) has rightly deleted the penalty made by the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
Appeal against cancellation of penalty under section 271(1)(c) of the Income Tax Act, 1961 by CIT(A) for assessment year 2009-10.

Analysis:
1. The Revenue filed an appeal against the cancellation of penalty of Rs. 31,41,308/- by the CIT(A) under section 271(1)(c) of the Income Tax Act, 1961. The AO had disallowed Rs. 92,41,858/- under section 14A based on Rule 8D, leading to the penalty imposition.

2. The CIT(A) deleted the penalty after considering the written submissions and various legal precedents. The Tribunal reviewed the case, focusing on the provisions of section 271(1)(c) regarding concealment or furnishing inaccurate particulars of income.

3. The Tribunal highlighted the evolution of the law on penalty imposition, emphasizing the shift from proving Mens rea to placing the burden of proof on the taxpayer. It referenced landmark judgments like Dilip N. Shroff and T. Ashok Pai, outlining rules for penalty imposition.

4. The Tribunal discussed the significance of the Dharamendra Textile Processor case, stating that Mens rea is not essential for civil penalties. It also referenced the Reliance Petro Products case, clarifying that inaccurate particulars must involve incorrect or false details to warrant a penalty.

5. Considering the facts of the case where the AO disallowed expenses based on a difference of opinion regarding Rule 8D applicability, the Tribunal agreed with the CIT(A)'s decision to delete the penalty. It cited previous judgments supporting the view that a mere incorrect claim does not constitute furnishing inaccurate particulars.

6. Ultimately, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the penalty under section 271(1)(c). It concluded that the AO's addition was based on a disagreement rather than concealment or inaccurate particulars, aligning with legal precedents and decisions.