2018 (5) TMI 1733 - HC - Income Tax

Penalty u/s 271(1)(c) - Deduction u/s 80IC - Non acceptance of revised return - Held that - mere making of claim which is found to be not sustainable in law will not amount to furnishing inadequate particulars. Assessing Officer has rejected the revised return, wherein, part of the claim sought to be laid at the doorstep of Section 80IC was rejected and the order of the Assessing Officer has also become final; but that also may not suffice to impose penalty under Section 271(1)(c) as what the law contemplates is making of a false claim or a claim which is not bonafide. - Decided in favor of assessee.

Summary

Issues:
- Appeal under Section 260-A of Income Tax Act, 1961 by Revenue against ITAT order
- Claim of deduction under Section 80IC of the Act
- Addition of interest income by Assessing Officer
- Imposition of penalty under Section 271(1)(c) of the Act
- Interpretation of Explanation 1 to Section 271(1) of the Act
- Tribunal's conclusion on Section 271(1)(c) applicability
- Analysis of the Apex Court judgment on penalty provision

Appeal under Section 260-A:
The case involves an appeal by the Revenue under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'B', New Delhi. The Tribunal had dismissed the Revenue's appeal against the order of CIT (Appeal), Dehradun, leading to the current legal challenge.

Claim of Deduction under Section 80IC:
The appellant had initially declared a total income and claimed a deduction under Section 80IC of the Act. Subsequently, a revised return was filed declaring nil income by claiming a higher deduction under Section 80IC. The Assessing Officer did not accept the revised return, leading to an addition of interest income, which the appellant did not challenge. The case revolved around the eligibility of the claim for deduction under Section 80IC.

Imposition of Penalty under Section 271(1)(c):
The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act based on the disallowed claim in the revised return. However, the Commissioner (Appeals) and the Tribunal concluded that the provision of Section 271(1)(c) was not attracted in this case.

Interpretation of Explanation 1 to Section 271(1):
The Tribunal analyzed Explanation 1 to Section 271(1) of the Act, emphasizing the distinction between 'false' and 'incorrect' explanations. The importance of 'particulars' in the context of penalty provisions was highlighted, citing relevant legal precedents.

Tribunal's Conclusion on Section 271(1)(c) Applicability:
The Tribunal found that the case did not involve concealment of income or furnishing inadequate particulars. It relied on precedents to determine that making an unsustainable claim does not necessarily amount to furnishing inaccurate particulars, as detailed explanations and justifications were provided by the appellant.

Analysis of Apex Court Judgment on Penalty Provision:
The judgment referenced a Supreme Court ruling emphasizing that a mere incorrect claim, if made in good faith and substantiated, does not constitute furnishing inaccurate particulars. The Court stressed the need for inaccuracies in the return to invoke penalty provisions, highlighting the importance of bona fide claims supported by relevant documentation.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the appellant's claim, though not sustainable in law, did not warrant the imposition of penalty under Section 271(1)(c) of the Act. The judgment underscored the significance of bona fide claims and the necessity for inaccuracies in the particulars provided to trigger penalty provisions.