2017 (2) TMI 332 - AT - Income Tax

Penalty levied u/s 271(1)(c) - false claim made towards interest deduction while computing income from house property - Held that - The assessee has deliberately filed inaccurate particulars in respect of the claim made towards interest deduction while computing income from house property. It is apparent from the facts that entire loan amount was not utilized for purchase of the property on which rental income was earned. Similar deductions were made in the assessment years 2007-08, 2008-09 and 2009-10. It is not in dispute that the assessee herself filed revised return for the assessment year 2009-10. This shows that the assessee all along knows that the entire interest claimed against rental income is not allowable. However, for the 2010-11, no such revised return was filed. The intentions of the assessee in claiming entire interest as deduction from house property income does not appear to be bonafide. Thus we agree with the view of the lower authorities that the assessee had deliberately and intentionally made a false claim of excess interest against the house property income. However, at the same time, we are of the considered view that this is not a fit case for levy of 300% penalty. Therefore, we direct the assessing officer to levy minimum penalty i.e. 100% of the income sought to be evaded and compute the penalty accordingly. - Decided partly in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for inaccurate particulars in interest claim under house property income.

Analysis:

1. Background: The appellant, an individual with various income sources, filed a return for the assessment year 2010-11. The assessing officer disallowed a portion of the interest claimed under section 24 against rental income, leading to penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars.

2. Assessment and Disallowance: The assessing officer found that the appellant claimed interest on a loan of ?4,00,00,000 against house property income, although not all of it was used for property purchase. The officer disallowed a portion of the interest and initiated penalty proceedings.

3. Explanation and Rejection: The appellant argued that the interest claim was based on the loan for property acquisition and cited previous years' practices. However, the assessing officer rejected the explanation, deeming the claim as intentional and not in compliance with the Act.

4. Penalty Imposition: The assessing officer imposed a 300% penalty on the income sought to be evaded, considering past discrepancies and lack of revised returns for the year in question. The penalty was upheld by the Ld. CIT (Appeals).

5. Appellant's Defense: The appellant contended that the claim was a mistake and not intentional, citing legal precedents to support the argument that unsustainable claims do not constitute inaccurate particulars.

6. Judicial Decision: The appellate tribunal found the appellant's actions deliberate and intentional, indicating a pattern of false claims. While agreeing on the inaccurate particulars, the tribunal reduced the penalty to 100% of the income sought to be evaded, considering the circumstances.

7. Conclusion: The tribunal partially allowed the appeal, acknowledging the inaccurate particulars but reducing the penalty to 100%. The judgment emphasized the deliberate nature of the false claim and the need for accurate disclosure in tax matters.

This detailed analysis of the judgment outlines the issues, the arguments presented, the authorities' decisions, and the final judicial determination, providing a comprehensive understanding of the case's legal aspects.