2016 (8) TMI 519 - HC - Income Tax

Penal proceedings u/s 271(1) (c) - treating the interest income as income from other sources - Held that - Apex Court in the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. reported in 2010 (3) TMI 80 - SUPREME COURT wherein the Apex Court has 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 and such a claim made in return cannot amount to furnishing inaccurate particulars and that therefore there is no question of inviting penalty under section 271(1)(c). The revenue has not been able to prove that there is a mala fide intention on the part of the assessee. The main issue seems to be bona fide difference in the interpretation of law and therefore it cannot be said that the details supplied by the assessee in its return were found to be incorrect or erroneous or false. Therefore, there would be no question of inviting the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee

Summary

Issues:

1. Whether the Appellate Tribunal was right in reversing the order passed by the CIT(A) and deleting the penalty under section 271(1)(c) of the Income Tax Act when the quantum additions were confirmed?

Analysis:

Issue 1:
The main issue in this case was whether the Appellate Tribunal correctly reversed the order passed by the CIT(A) and deleted the penalty under section 271(1)(c) of the Income Tax Act when the quantum additions were confirmed. The Assessing Officer treated interest income earned on share application money as income from other sources and imposed a penalty for concealment of income. Both the CIT(A) and ITAT upheld the decision regarding the interest income but differed on the penalty. The revenue contended that the penalty was justified as the assessee did not disclose the correct income. On the other hand, the assessee argued that the addition was due to a bona fide difference in the interpretation of law, citing a Supreme Court decision that making a claim not sustainable in law does not amount to furnishing inaccurate particulars. The Tribunal agreed with the assessee, noting the absence of mala fide intention and that the penalty was unwarranted due to a genuine interpretation discrepancy.

Analysis:
The Tribunal's decision was based on the principle that the conditions under section 271(1)(c) must be met before imposing a penalty, emphasizing that furnishing an assessment of property value may not constitute inaccurate particulars. The Tribunal found no evidence that the details provided by the assessee were incorrect or false, leading to the deletion of the penalty. The Tribunal's reasoning focused on the lack of mala fide intent, highlighting the bona fide difference in legal interpretation as the crux of the issue. Consequently, the Tribunal confirmed the decision to delete the penalty, ultimately dismissing the Tax Appeal in favor of the assessee.