2018 (1) TMI 137 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - Assessing Officer, in the penalty order, has observed that the assesseee has furnished inaccurate particulars. The AO has held that the act of not adding back the impugned amount to the computation of income was an act of furnishing of inaccurate particulars of income. The Ld. CIT (A) has also confirmed the imposition of penalty. However, with regard to the provisions of section 271(1)(c ) of the Act pertaining to penalty, the Hon ble Apex Court has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. See CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT ) - Decided in favour of assessee

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2009-10 based on inaccurate particulars of income.

Analysis:
The appeal was filed by the assessee against the penalty of ?19,800 imposed under section 271(1)(c) of the Income Tax Act, 1961. The penalty was confirmed by the Ld. CIT (Appeals) in relation to the addition of ?66,000 made by disallowing certain expenses claimed by the assessee. The assessee had debited total expenses of ?3,30,000 on account of the issue of shares, out of which ?2,64,000 was added back in the computation of total income, but the balance amount of ?66,000 was not added back, leading to an excess claim of expenses. The penalty was imposed for furnishing inaccurate particulars of income.

The departmental representative argued that the penalty was rightly imposed as the expenses on the issue of shares were considered capital expenditure, and the assessee's claim of treating it as revenue expenditure lacked bona fide. However, upon examination, it was found that the relevant details were on record and formed part of the return of income, indicating no concealment of particulars of income.

Referring to the decision of the Hon'ble Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd., it was highlighted that for the penalty under section 271(1)(c) to apply, there must be concealment of income particulars and furnishing of inaccurate income details. The Court emphasized that making an incorrect claim in law does not amount to furnishing inaccurate particulars. As no incorrect or inaccurate information was found in the return, the penalty provision could not be invoked.

Considering the facts of the case and the legal precedent, the ITAT set aside the Ld. CIT (Appeals) order and directed the Assessing Officer to delete the penalty. The judgment was based on the principle that merely making an unsustainable claim does not constitute furnishing inaccurate particulars of income, as established by the Hon'ble Apex Court in the Reliance Petroproducts case.

In conclusion, the appeal of the assessee was allowed, and the penalty under section 271(1)(c) was revoked based on the lack of inaccurate particulars of income.