2008 (8) TMI 15 - HC - Income Tax

Penalty u/s 271 - Inadvertently the assessee had claimed 100% deduction under Section 80 HHE when he was actually entitled to only an 80% deduction assessee did this on the basis of expert advice which had been certified by his Chartered Accountant explanation offered by the assessee was bona fide and that all facts which were material to the computation of his income had been disclosed by the assessee penalty not imposable

Summary

Issues:
1. Claim of 100% deduction under Section 80 HHE of the Income-tax Act, 1961 for the assessment year 2001-02.
2. Imposition of penalty under Section 271(1)(c) for claiming excessive deduction.

Analysis:
1. The appellant, the revenue, challenged the order of the Income-tax Appellate Tribunal regarding the claim of 100% deduction under Section 80 HHE for the assessment year 2001-02. The assessee had mistakenly claimed 100% deduction instead of the permissible 80%. The Assessing Officer pointed out the error during assessment, resulting in the income being assessed at Rs 63,03,463/- with an 80% deduction. Penalty proceedings were initiated under Section 271(1)(c) due to the excessive claim.

2. In the penalty proceedings, the assessee explained that the error was unintentional, relying on advice from their Chartered Accountant. The Commissioner of Income-tax (Appeals) found that the excess deduction was due to inadvertent error and reliance on incorrect advice, leading to the deletion of the penalty. The tribunal upheld this decision, emphasizing that the claim was certified by the Chartered Accountant, indicating a bona fide mistake. The tribunal concluded that all primary facts were disclosed, and no inaccurate particulars were furnished, leading to the dismissal of the revenue's appeal.

3. The High Court upheld the tribunal's decision, citing the Supreme Court's ruling that for penalty under Section 271(1)(c), it must be proven that the explanation offered is not bona fide and all material facts were not disclosed. In this case, it was established that the assessee's explanation was genuine, all relevant facts were disclosed, and the error was made in good faith based on professional advice. Therefore, the imposition of a penalty was unwarranted, and the tribunal's order was upheld. The court found no substantial question of law for consideration and dismissed the appeal.

This detailed analysis highlights the key legal issues, the sequence of events, the reasoning behind the decisions at each stage, and the legal principles applied in reaching the final judgment.