2016 (1) TMI 789 - HC - Income Tax

Penalty u/s 271 (1)(c) - disallowance of expenditure - Held that - A wrong explanation cannot amount to furnishing of an incorrect particular. The non-furnishing of explanation falls within the same zone of consideration unless there is any adverse evidence to indicate that the concealment was deliberate or incorrectly depicted in the return with a view to evade any liability. The explanation in relation to Section 271 (1)(c) as pressed into service read with clause (B) if read together, the same would clearly indicate that the ratio of the judgment in the case of Commissioner of Income Tax Vs. Reliance Petro Products Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) is clearly attracted. The Commissioner Income Tax (Appeal) has specifically recorded that the variation in returned income and assessed income is disallowance of expenses not found allowable, no penalty under Section 271(1)(c) of the Act is imposable and once such a finding has specifically been recorded, the penalty proceedings in the facts and circumstances of the case can not be sustained. - Decided in favour of assessee.

Summary

Issues:
- Correctness of the reversal order by the Tribunal regarding penalty proceedings for inaccurate particulars of income.

Analysis:
The High Court addressed the issue of alleged concealment or inaccurate particulars in the return filed by the assessee. The appellant contended that the figures given in the return were inaccurate, amounting to concealment, justifying penalty proceedings. The court referred to the judgment in Mak Data Pvt. Ltd. to argue that the burden of proof was on the assessee, and failure to provide an explanation constituted concealment. However, the court cited the case of Commissioner of Income Tax Vs. Reliance Petro Products Pvt. Ltd. to emphasize that the provision for penalty under Section 271(1)(c) required strict interpretation. The court highlighted that incorrect claims did not necessarily amount to furnishing inaccurate particulars.

The court disagreed with the Assessing Officer's finding that the non-furnishing of an explanation by the assessee constituted concealment. The Commissioner of Income Tax and the Tribunal had correctly reversed this decision, emphasizing that a wrong explanation did not equate to providing incorrect particulars. The court stressed that unless there was evidence of deliberate concealment or incorrect depiction in the return to evade liability, non-furnishing of an explanation did not warrant penalty under Section 271(1)(c). The court upheld the decision that disallowance of expenses did not justify imposing a penalty under the Act.

In conclusion, the High Court found no substantial question of law for consideration and rejected the appeal, affirming the decision of the Commissioner of Income Tax and the Tribunal. The judgment clarified the distinction between inaccurate particulars and incorrect claims, emphasizing the need for strict adherence to the provisions governing penalty proceedings under Section 271(1)(c) of the Income Tax Act.