2017 (5) TMI 788 - HC - Income Tax

Penalty under Section 271(1)(c) - whether the assessee had furnished inaccurate particulars of its income by claiming wrong deduction under Section 80IA on interest income? - Held that - It has been categorically recorded by the Tribunal that even if it is assumed that the claim made by the assessee on the advise of Chartered Accountant was wrong, still it was not a good ground for imposing penalty under Section 271(1)(c) of the Act, as two conditions are required to be satisfied i.e. firstly there should be furnishing of inaccurate particulars and secondly, there must be concealment of income. Even if there was wrong claim, it could be denied by the Assessing Officer. It could be a good case for addition but not for penalty. It was concluded by the Tribunal that the assessee did not furnish inaccurate particulars with the intention to conceal income and rather it made a claim on the advise of the chartered accountant which was found to be not correct. Thus, the Tribunal rightly concurred with the findings recorded by the CIT(A) and dismissed the appeal filed by the revenue. - Decided in favour of assessee.

Summary

Issues:
1. Justification of deleting penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the assessee furnished inaccurate particulars of income by claiming wrong deduction under Section 80IA of the Act on interest income.

Issue 1:
The appellant-revenue filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT) deleting the penalty imposed under Section 271(1)(c) of the Act. The Assessing Officer had imposed a penalty of ?47,77,500 for furnishing inaccurate particulars of income. The CIT(A) and the Tribunal both deleted the penalty. The Tribunal found that the claim made by the assessee for deduction under Section 80IA on interest income was wrong, but it was not a ground for imposing a penalty as there was no intention to conceal income. The Tribunal concluded that the assessee did not furnish inaccurate particulars with the intention to conceal income, rather the claim was made based on advice from a Chartered Accountant. The Tribunal upheld the decision of the CIT(A) in deleting the penalty, stating that even if the claim was wrong, it could be a case for addition but not for penalty.

Issue 2:
The assessee had claimed deduction under Section 80IA of the Act on interest income, which was disallowed by the Assessing Officer as the interest income was not profit derived from an industrial undertaking. The Assessing Officer levied a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income. However, the Tribunal found that the claim made by the assessee based on advice from a Chartered Accountant, though incorrect, did not amount to furnishing inaccurate particulars with the intent to conceal income. The Tribunal referred to judicial pronouncements and held that the claim made by the assessee, even if wrong, did not attract a penalty under Section 271(1)(c) as there was no concealment of income. The Tribunal's decision was supported by relevant case laws and legal principles, including the interpretation of "particulars" under the Income Tax Act.

In conclusion, the High Court upheld the Tribunal's decision to delete the penalty imposed under Section 271(1)(c) of the Income Tax Act, emphasizing that the claim made by the assessee, though incorrect, did not amount to furnishing inaccurate particulars with the intention to conceal income. The Court dismissed the appeal by the appellant-revenue, stating that no substantial question of law arose from the Tribunal's findings.