2016 (12) TMI 1775 - AT - Income Tax

Penalty u/s 271(1)(c) - claim made on account of deduction u/s 80P(2)(a)(i) and denial of provision made for overdue interest - HELD THAT - In the present case, the assessee neither concealed the income nor filed inaccurate particulars. The assessee has only made a claim. According to the assessee, it is eligible for deduction under section 80P(2)(a)(i) and filed return of income by disclosing all the facts. AO denied the claim, which was confirmed by the Commissioner of Income Tax (Appeals). This is not automatically amounting to neither concealment of income nor filing of inaccurate particulars. Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT held that 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. Provision of overdue interest - It is not the case of the Commissioner of Income Tax (Appeals) that the assessee neither concealed the income nor filed inaccurate particulars. The case of the assessee is that he made a provision on sticky loans by following the RBI guidelines by filing all the details before the Assessing Officer. Once, the assessee filed all the details in his return of income and made a provision, if the Assessing Officer has denied the provision made by the assessee, it cannot be said that the provision made by the assessee is neither concealment nor filing inaccurate particulars of income. It is only a legal claim made by the assessee. This aspect has already been considered while dealing with section 80P(2)(a)(i) (supra) and by following the judgment of the Hon'ble Supreme Court, the penalty levied by the Assessing Officer is to be cancelled - it is not a fit case for imposing penalty under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Claim of deduction under section 80P(2)(a)(i) of the Income Tax Act.
2. Denial of provision made for overdue interest.
3. Penalty proceedings under section 271(1)(c) of the Act.

Claim of deduction under section 80P(2)(a)(i) of the Income Tax Act:
The case involved cross-appeals by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09. The assessee, a registered society, claimed deduction under section 80P(2)(a)(i) of the Act but was denied by the Assessing Officer on the grounds of following a mercantile system of accounting. The Commissioner of Income Tax (Appeals) upheld this denial, leading to penalty proceedings under section 271(1)(c) for alleged concealment of income. The Commissioner of Income Tax (Appeals) later canceled the penalty, citing the claim as debatable and not made in a non-bonafide manner. The Tribunal, after considering the facts, held that the claim made by the assessee did not amount to concealment of income or filing of inaccurate particulars, following the principle laid down by the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd.

Denial of provision made for overdue interest:
Regarding the provision made for overdue interest, the Assessing Officer denied the claim, invoking penalty under section 271(1)(c) for alleged concealment of income. The Commissioner of Income Tax (Appeals) upheld this decision, stating that the method followed by the assessee was inconsistent with accounting principles and judicial decisions. However, the Tribunal found that the provision made by the assessee was a legal claim based on RBI guidelines, and the denial of this claim did not amount to concealment or filing inaccurate particulars. Relying on the judgment of the Hon'ble Supreme Court, the Tribunal allowed the appeal filed by the assessee, reversing the decision of the Commissioner of Income Tax (Appeals).

Penalty proceedings under section 271(1)(c) of the Act:
In both instances, the Tribunal emphasized that the mere making of a claim, even if not sustainable in law, does not amount to furnishing inaccurate particulars regarding income. The Tribunal, following the judgment in Reliance Petroproducts Pvt. Ltd., concluded that there was no concealment or inaccuracy in the assessee's actions, leading to the dismissal of the Revenue's appeal and allowing the appeal filed by the assessee. The Tribunal highlighted the importance of considering all facts and circumstances before imposing penalties under section 271(1)(c) of the Act, ensuring that legal claims are distinguished from deliberate concealment or inaccuracies in income reporting.