2016 (8) TMI 733 - AT - Income Tax

Levy of penalty levied u/s.271(1)(c) - AO disallowed interest as of the view that assessee had diverted interest- bearing funds for nonbusiness purposes - It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability. Further, merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Further, in the present case, there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010 (3) TMI 80 - SUPREME COURT ), wherein the Hon ble Apex Court has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. - Decided in favour of assessee.

Summary

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

Analysis:

Issue 1:
The appeal was against the order of the Commissioner of Income Tax (Appeals) upholding the penalty levied by the Assessing Officer under section 271(1)(c) of the Act for Assessment Year 2002-03.

Analysis:
The Assessee, a company engaged in manufacturing and sale of agricultural equipment, filed its return of income showing a total loss. The assessment was framed by disallowing interest, leading to a penalty under section 271(1)(c) for allegedly furnishing inaccurate particulars of income and concealing income. The CIT(A) partially upheld the addition, leading to the penalty. The Assessee contended that it had sufficient interest-free funds available for the advances made. The Tribunal noted that the penalty for concealment of income must be evaluated separately from additions in the assessment, and the Revenue must prove that the claim of expenses was not genuine. Relying on the Supreme Court judgment, it was held that a mere unsustainable claim does not amount to furnishing inaccurate particulars of income.

Issue 2:
Assessee's appeal against the penalty under section 271(1)(c) of the Act.

Analysis:
During the appeal hearing, no one appeared on behalf of the Assessee. The Senior DR supported the lower authorities' order. The Tribunal observed that there was no evidence to show that the Assessee filed inaccurate particulars of income or concealed income. Referring to the Supreme Court judgment, it was held that an unsustainable claim does not constitute inaccurate particulars. Consequently, the Tribunal directed the deletion of the penalty under section 271(1)(c) of the Act.

In conclusion, the Tribunal allowed the Assessee's appeal, emphasizing that the penalty for furnishing inaccurate particulars of income and concealing income was not justified based on the circumstances and legal precedents cited.