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2015 (12) TMI 775 - HC - Income TaxPenalty u/s 271(1)(c) - addition treating profits on cancellation of forward foreign exchange contract as trading receipt instead of capital receipt - Held that - The question is whether non-acceptance of a claim can be said to be a concealment. In a case where claim is made it is for the authorities to decide. It may or may not accept the claim. In the instant case, as the sum claimed as deduction is undisputed, it cannot be said that the assessee had furnished inaccurate particulars of income. Since there is no finding that the factual details furnished by the assessee in its return were inaccurate or erroneous or false and as the assessee had claimed the deduction of an expenditure treating it be capital in nature, it is appropriate to refer to the law laid down by the Supreme Court in CIT vs. Reliance Petroproducts 2010 (3) TMI 80 - SUPREME COURT wherein held A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. Thus the income tax authorities erred in imposing the penalty and the Tribunal was not justified in upholding the imposition of penalty. - Decided in favour of assessee
Issues:
1. Interpretation of Section 271(1)(c) of the Income Tax Act, 1961 regarding penalty imposition for claiming exchange gain on cancellation of a forward contract as a capital receipt. Analysis: The High Court of Calcutta dealt with an Income Tax Appeal concerning the assessment year 1993-94. The primary issue revolved around the interpretation of Section 271(1)(c) of the Income Tax Act, 1961, specifically focusing on whether a penalty could be imposed for treating exchange gain from a canceled forward contract as a capital receipt. The case involved the assessee initially showing the receipt as a revenue item in its profit and loss account, leading to an addition in the assessment order. The Assessing Officer then initiated penalty proceedings under Section 271(1)(c) due to alleged inaccurate particulars in the return. The CIT(A) dismissed the appeal, but the Tribunal's decision was in favor of the assessee. The Tribunal emphasized that post the insertion of Explanation I to Section 271(1)(c), conscious concealment of income particulars was not a prerequisite, and any unsatisfactory explanation could be deemed as concealment. The Tribunal concluded that the assessee furnished inaccurate particulars by claiming the amount as a revenue receipt, overturning the CIT(A)'s decision. Regarding the penalty imposition, the High Court analyzed the contentions of both parties. The appellant argued that since the computation of income was disclosed without concealment, Section 271(1)(c) should not apply. Reference was made to relevant case laws, including C.I.T. vs. Reliance Petroproducts Pvt. Ltd., to support this stance. On the other hand, the respondent relied on a different judgment to assert that the Tribunal's decision was justified due to the lack of proper explanation from the assessee. The Court examined the claimed deduction of a specific amount attributable to foreign exchange fluctuation and highlighted that the figure was undisputed, indicating transparency in the disclosure. The Court reiterated the principle that a mere unsustainable claim does not constitute inaccurate particulars under Section 271(1)(c), citing the Supreme Court's ruling in CIT vs. Reliance Petroproducts. The Court emphasized that as long as the factual details in the return were accurate, the penalty provision should not be invoked solely based on a disputed claim. In conclusion, the High Court set aside the Tribunal's order, ruling that the income tax authorities erred in imposing the penalty and the Tribunal's decision to uphold the penalty was unjustified. The Court emphasized the importance of accurate disclosure of factual details in the return to avoid penalties under Section 271(1)(c) and highlighted the significance of transparency in claiming deductions to prevent misconceptions of concealment or inaccurate particulars of income.
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