2019 (4) TMI 1670 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - claim of HRA denied - assessee has claimed HRA deduction from his salary income - HELD THAT - There is no dispute that the assessee was 1/3rd owner of the house property for which he has paid rent to the other co-owners, It cannot be said that the assessee paid rent with malafide intention to reduce his tax liability. The rent was actually paid to the co-owners and this fact has also not been disputed by the AO. Merely because the claim of the assessee did not find any favour with the AO would not, ipso facto, become a bogus claim. As RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT direct the Assessing Officer to delete the penalty so levied u/s 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
Challenge to correctness of order of CIT(A) confirming penalty u/s 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The appeal challenged the order of the Commissioner of Income Tax [Appeals] regarding the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2007-08. The Assessing Officer disallowed the House Rent Allowance (HRA) deduction claimed by the assessee as he was a part owner of the property for which he paid rent. The penalty proceedings were initiated, and a penalty of ?80,000 was imposed under section 271(1)(c) of the Act. The assessee contended that the denial of HRA claim did not amount to furnishing inaccurate particulars of income or concealment of income. The CIT(A) upheld the penalty. The Accountant Member noted that the assessee paid rent to co-owners genuinely without any malafide intention to reduce tax liability. Citing the Supreme Court judgment in CIT vs Reliance Petroproducts Pvt. Ltd, it was emphasized that incorrect claims do not necessarily constitute furnishing inaccurate particulars. Therefore, the penalty was directed to be deleted.

The primary issue revolved around whether the denial of HRA claim by the Assessing Officer warranted the imposition of penalty u/s 271(1)(c) of the Income-tax Act, 1961. The Accountant Member analyzed the facts and legal precedents to determine that the assessee's claim, though disallowed, did not amount to furnishing inaccurate particulars of income. The judgment highlighted the importance of accurate particulars and the distinction between incorrect claims and inaccurate particulars, as established by the Supreme Court ruling in CIT vs Reliance Petroproducts Pvt. Ltd.

The judgment delved into the specifics of the case, emphasizing that the assessee's payment of rent to co-owners, even though the claim was disallowed, was not done with any malafide intent to evade taxes. The Accountant Member's decision to delete the penalty was based on the interpretation of section 271(1)(c) and the application of legal principles outlined in the Supreme Court judgment. The judgment underscored the significance of accurate information in the return and clarified that incorrect claims, by themselves, do not constitute furnishing inaccurate particulars of income. The appeal was allowed, and the penalty was directed to be deleted, concluding the matter in favor of the assessee.