2018 (6) TMI 695 - AT - Income Tax

Penalty u/s 271(1)(c) - AO has held that the act of claiming expenditure which was not allowable under the provisions of the Act was an act of furnishing of inaccurate particulars of income and concealment - Held that - The explanation of the assessee regarding inadvertent error lacked bona fide. However, with regard to the provisions of section 271(1)(c) 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. In CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income and concealing income.

Analysis:
1. The assessee appealed against the penalty imposed under section 271(1)(c) for disallowance of interest for delayed TDS payments and donation. The appeal was heard ex parte as the assessee failed to appear despite notices being returned unserved.

2. The penalty was imposed based on the assessee's explanation that the disallowed payments were claimed as expenditure by mistake and were surrendered during assessment proceedings. The CIT(A) found the explanation not bona fide, suspecting the assessee's motives due to the chance of non-scrutiny.

3. The Senior Departmental Representative supported upholding the penalty, citing the lower authorities' concurrent findings. However, the ITAT noted the careless attitude of the assessee but proceeded to adjudicate the appeal on its merits.

4. Referring to the Supreme Court decision in CIT v. Reliance Petroproducts, the ITAT emphasized that incorrect claims in law do not amount to furnishing inaccurate particulars of income. As no incorrect or inaccurate information was found in the return, the penalty under section 271(1)(c) could not be justified.

5. Ultimately, the ITAT set aside the penalty, following the Supreme Court's ruling, and directed the Assessing Officer to delete the penalty. The appeal of the assessee was allowed.

This detailed analysis of the judgment highlights the grounds of appeal, the reasoning behind the penalty imposition, the arguments presented by both sides, the legal interpretation provided by the ITAT, and the final decision to delete the penalty based on the Supreme Court precedent.