2016 (2) TMI 1245 - AT - Income Tax

Penalty u/s 271(1)(c) - addition by invoking deemed provisions u/s 2(22)(e) - HELD THAT - The Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT has observed that where there is no finding that any details supplied by the assessee in its return of income are found to be incorrect or erroneous or false, there is no question of invoking penalty u/s 271(1)(c) of the Act. Mere making a claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such as claim made in the return cannot amount to furnishing inaccurate particulars. In the present case, the assessee filed all the details and he made claim i.e. the amount received by him is an advance. According to the assessing officer the amount received by the assessee is a deemed dividend by virtue of deemed provisions of law i.e. 2(22)(e) of the Act. Thus, we find that the assessee neither concealed the income nor filed inaccurate particulars. The above judgement of the Hon ble Supreme Court squarely applies to the facts of the case

Summary

Issues:
Assessment of deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961, Penalty u/s 271(1)(c) for concealing income or furnishing inaccurate particulars.

Analysis:
1. The appeals were filed by the revenue against the CIT(A) order for the assessment year 2001-02, concerning the assessment of deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961. The A.O. noted the assessee's interest in M/s. Pratyusha Associates and M/s. Pratyusha Shipping Pvt. Ltd., assessing a loan amount as deemed dividend. The CIT(A) and ITAT confirmed this assessment.

2. Penalty proceedings u/s 271(1)(c) were initiated by the A.O. for alleged concealment of income. The assessee argued that no concealment occurred as the information was disclosed. However, the A.O. imposed the penalty, which was later deleted by the CIT(A) on the basis that the issue of advance vs. deemed dividend was interpretative, thus no penalty could be levied.

3. The Tribunal considered the arguments from both sides. The A.O. treated the amount received as deemed dividend, while the assessee claimed it was an advance. The Tribunal agreed with the assessee that no concealment or inaccurate particulars were involved, citing the Hon'ble Supreme Court's observation that a mere unsustainable claim does not constitute inaccurate particulars.

4. The Tribunal found that the assessee had provided all details and made a claim that the amount was an advance, not deemed dividend. Since there was no concealment or furnishing of inaccurate particulars, the penalty was unjustified. The Tribunal upheld the CIT(A)'s decision to delete the penalty, dismissing the revenue's appeal.

5. Another appeal with similar facts and issues was also dismissed following the same reasoning. The Tribunal concluded that the assessee did not conceal income or furnish inaccurate particulars, aligning with the Supreme Court's stance on penalty imposition. Both appeals filed by the revenue were ultimately dismissed.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the penalty imposed under section 271(1)(c) as the assessee had not concealed income or furnished inaccurate particulars, emphasizing the importance of providing all details and the interpretative nature of the issue at hand.