2021 (12) TMI 1320 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has furnished inaccurate particulars of income - inaccurate particulars of income v/s inaccurate claim - whether the assessee has furnished inaccurate particulars of income with respect to research and development activity carried out by it to the tune of 50% of the total claim? - HELD THAT - The claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the inaccurate particulars of income. It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent. As regards the explanation 1 to section 271(1)(c) of the Act there was no iota of evidence suggesting that the explanation offered by the assessee was false. Since the research and development facility was maintained by the assessee and the expenditures were also incurred by it claim of the assessee cannot be said amounting to concealment of particulars of income - there was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bonafides with respect to material facts relating to the computation of total income. Thus in our considered view the provisions of expression 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. We set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed.

Summary

Issues Involved:
Penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Accuracy of Particulars of Income
The appellant contested the penalty imposed under section 271(1)(c) of the Act, arguing that it did not furnish inaccurate particulars of income. The Assessing Officer (AO) disallowed 100% of the claimed research and development expenses, which the Commissioner of Income Tax (Appeals) reduced to 50%. The appellant's position was that the expenses were genuine, and the penalty was based on an ad hoc addition. The appellant maintained that it did not furnish inaccurate particulars of income.

Issue 2: Interpretation of 'Inaccurate Particulars'
The term 'inaccurate particulars' was not defined in the Act. The Tribunal referred to the dictionary meaning, indicating something incorrect or wrong. The Tribunal noted that the appellant's claim for 50% of the research and development expenses was not acknowledged, leading to the conclusion that the claim was inaccurate. However, the Tribunal highlighted that deliberate intent or consciousness is required to establish inaccurate particulars, as discussed in the Dilip N Shroff case. Mere differences in declared and assessed income do not automatically imply inaccurate particulars.

Issue 3: Application of Explanation 1 to Section 271(1)(c)
Explanation 1 to section 271(1)(c) deals with deemed concealment of income. The Tribunal analyzed whether the appellant's case fell under the main provisions of section 271(1)(c) or Explanation 1. It was observed that the genuineness of expenses was not in question, and the disagreement was on the quantum of expenses allocated to associated concerns. The Tribunal concluded that the appellant's claim could be considered inaccurate but not tantamount to furnishing inaccurate particulars of income with dishonest intent.

Conclusion:
After considering the arguments and evidence, the Tribunal set aside the penalty imposed by the AO under section 271(1)(c) of the Act. The Tribunal found that the appellant did not furnish inaccurate particulars of income with dishonest intent. Therefore, the appeal of the assessee was allowed, and the penalty was directed to be deleted.

This detailed analysis of the judgment highlights the key issues, legal interpretations, and the Tribunal's decision regarding the penalty under section 271(1)(c) of the Income Tax Act.