2016 (7) TMI 452 - AT - Income Tax

Levy of penalty under section 271(1)(c) - bogus claim of exemption of income under section 80P - Held that - Since the assessee made bogus claim of exemption of income under section 80P of the Act in the return of income, therefore, assessee furnished inaccurate particulars of income so as to levy the penalty under section 271(1)(c) of the Act. - Decided against assessee.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act.
2. Eligibility of interest income from deposits with non-cooperative banks for deduction under section 80P of the Act.
3. Eligibility of income from the sale of cement, hardware, CFL, and insurance for deduction under section 80P of the Act.
4. Validity of the assessee's claim of exemption under section 80P of the Act.

Detailed Analysis:

1. Levy of penalty under section 271(1)(c) of the Income Tax Act:
The appeal was directed against the order of the CIT(Appeals)-I, Ludhiana, which upheld the penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income. The Assessing Officer (AO) initiated penalty proceedings after disallowing certain income claimed as exempt by the assessee. The CIT(Appeals) and ITAT both found that the assessee made a conscious and deliberate act of claiming a wrong deduction, thus justifying the penalty.

2. Eligibility of interest income from deposits with non-cooperative banks for deduction under section 80P of the Act:
The AO noticed that the assessee earned interest from fixed deposits (FDR) with non-cooperative banks, which amounted to ?1,51,73,115/-. This interest income was not eligible for deduction under section 80P(2)(d) of the Act. The CIT(Appeals) and ITAT upheld this view, noting that only interest from cooperative banks qualifies for exemption under this section. The assessee's claim that this income was eligible for deduction under section 80P(2)(a) was rejected as it was not supported by the Act.

3. Eligibility of income from the sale of cement, hardware, CFL, and insurance for deduction under section 80P of the Act:
The AO also disallowed income from the sale of cement, hardware, CFL, and insurance, totaling ?3,56,641/-, as it was not in accordance with the aims and objectives of the society and thus not eligible for deduction under section 80P. The CIT(Appeals) and ITAT confirmed this disallowance, stating that the income from these activities did not qualify for exemption under section 80P.

4. Validity of the assessee's claim of exemption under section 80P of the Act:
The assessee claimed a total exemption under section 80P, declaring 'nil' income. However, the AO found that the income included interest from non-cooperative banks and sales income, which were not exempt. The CIT(Appeals) and ITAT found that the assessee's claim was not only incorrect but also a conscious and deliberate act to claim a wrong deduction, thus constituting furnishing inaccurate particulars of income. The ITAT noted that the assessee had continued to claim the deduction despite the issue being settled against it in previous years.

Conclusion:
The ITAT upheld the penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income. The interest income from non-cooperative banks and income from sales activities were not eligible for deduction under section 80P. The assessee's claim of exemption was found to be a deliberate act of furnishing inaccurate particulars, justifying the penalty. The appeal was dismissed, confirming the orders of the lower authorities.