2024 (3) TMI 1207 - HC - Income Tax

Penalty u/s. 271(1)(c) - addition on account of disallowance of claim of deduction u/s. 36(i)(viii) - ITAT deleted addition holding that the variation in the deduction u/s. 36(1)(viii) was due to the change in the business profit and it cannot be said that assessee has furnished inaccurate particulars of income - It is department s case that only because assessee has offered income and not claimed deductions in the return of income would not absolve assessee from the liability of Section 271(1)(c) HELD THAT - TAT, in our view, correctly held that provisions of Section 271(1)(c) of the Act are not attracted. The ITAT was of the view and rightly so that assessee had made a bona fide claim under Section 36(1)(viii) as such deductions claimed is linked to the business profit. Only because there was variance in the deductions allowable due to change in determination of business profit, it cannot be said that assessee has furnished inaccurate particulars of income or concealed inaccurate particulars of income . As held by the Apex Court in Commissioner of Income Tax Vs. Reliance Petro Products Pvt Ltd. 2010 (3) TMI 80 - SUPREME COURT if we accept the contention of revenue, then in case of every return where the claim sum is not accepted by the AO for any reason, assessee will invite penalty u/s 271(1)(c). A mere making of the claim which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee, such claim made in the return cannot amount to be inaccurate particulars. Decided in favour of assessee.

Summary

Issues involved:
The judgment addresses the deletion of penalty under section 271(1)(c) by the Income Tax Appellate Tribunal (ITAT) in relation to the disallowance of a deduction under section 36(1)(viii) claimed by a banking company in its return of income for the assessment year 1999-2000.

Details of the Judgment:

1. The assessee-banking company initially declared a total income and book profit in its return of income for the assessment year 1999-2000. Subsequently, the company filed a revised return, which led to the Assessing Officer disallowing certain deductions.

2. The Assessing Officer imposed a penalty under section 271(1)(c) of the Income Tax Act, alleging that the additions made were a result of furnishing inaccurate particulars of income or concealment of income by the assessee. The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the penalty, a decision upheld by the ITAT.

3. The revenue contended that the assessee, by not claiming certain deductions initially, furnished inaccurate particulars of income. However, the ITAT held that the provisions of section 271(1)(c) were not attracted as the deductions claimed were linked to the business profit, and the variance in deductions due to a change in business profit did not amount to furnishing inaccurate particulars of income.

4. The judgment cited the case of Commissioner of Income Tax Vs. Reliance Petro Products Pvt Ltd. (2010) to support the view that a mere unsustainable claim in the return does not constitute inaccurate particulars of income. Accepting the revenue's contention would lead to penalties in cases where claims are not accepted by the Assessing Officer.

5. Ultimately, the High Court found that no substantial questions of law arose in the case and dismissed the appeal, affirming the ITAT's decision to delete the penalty under section 271(1)(c).

This summary provides a detailed overview of the issues involved in the judgment and the reasoning behind the decision to delete the penalty imposed under section 271(1)(c) by the ITAT.