1990 (11) TMI 211 - AT - Income Tax

Issues Involved:

1. Levy of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Bona fide belief and legal interpretation in filing revised returns.
3. Concealment of income and furnishing of inaccurate particulars.
4. Computation of penalty and tax evasion.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the IT Act, 1961:

The assessee company was penalized for allegedly concealing income and furnishing inaccurate particulars under Section 271(1)(c) of the IT Act, 1961, for the assessment year 1988-89. The original return filed on 30th June 1988 showed an income of Rs. 13,07,656, with deductions claimed under Sections 80HH and 80-I. The return was revised on 27th Dec 1988, increasing the deductions under Chapter VIA to Rs. 13,17,267. The Assessing Officer, however, allowed deductions of Rs. 10,06,834 under Sections 80HH and 80-I, maintaining the total income at Rs. 13,07,656 with a tax of Rs. 6,86,519. No additional tax demand was created.

2. Bona Fide Belief and Legal Interpretation in Filing Revised Returns:

The assessee argued that the revised return was filed based on a bona fide belief and legal opinions from various High Court decisions, which suggested that deductions under Sections 80HH and 80-I should be claimed before reducing the claim of brought forward investment allowance and deduction under Section 32AB. The assessee cited several cases, including Indian Transformers Ltd. vs. CIT, CIT vs. L.M. Van Mopped Diamond Tools (India) Ltd., and CIT vs. Lucas-TVS Ltd., to support their claim. The CIT(A) dismissed the argument, stating that the claim was not based on any legal opinion after the filing of the original return and that the explanation was not bona fide.

3. Concealment of Income and Furnishing of Inaccurate Particulars:

The assessee contended that there was no concealment of income or furnishing of inaccurate particulars, as all facts were clearly disclosed in both the original and revised returns. The CIT(A) disagreed, stating that the assessee had made a false claim in the revised return and had a wrongful intention to claim excessive deductions. The Tribunal, however, held that if an assessee interprets the law in a particular way, disclosing all relevant facts in the returns, it cannot be said that the assessee had filed a false return. The Tribunal cited decisions from the Madhya Pradesh High Court, Supreme Court, and Rajasthan High Court, which supported the view that a bona fide belief in a legal interpretation does not constitute a false return or concealment.

4. Computation of Penalty and Tax Evasion:

The Tribunal noted that the total income and tax computed by the assessee in both the original and revised returns, as well as after the final assessment, remained the same. Therefore, no further tax was payable, and the question of concealment or computation of any penalty could not arise. The Tribunal also observed that the assessee had paid tax amounting to Rs. 6,90,000, resulting in a refund of Rs. 3,481 after the final assessment. Additionally, the total deduction allowed as a result of the final assessment was more than the deduction claimed in the original return. Consequently, the Tribunal concluded that the levy of penalty under Section 271(1)(c) was not justified, and the assessee had successfully discharged the burden of proof.

Conclusion:

The Tribunal allowed the appeal, deleting the penalty imposed under Section 271(1)(c) of the IT Act, 1961, and dismissed the stay application as infructuous. The key takeaway is that a bona fide belief in a legal interpretation, coupled with full disclosure of relevant facts, cannot be construed as filing a false return or concealing income.

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