2012 (9) TMI 257 - AT - Income Tax

Penalty u/s 271(1)(c) - denial of deduction u/s 80IB - net profit from Power Plant has been shown at Rs.7.59 crores from total sale of power of Rs.9.05 crores only i.e. the NP rate of 83.91% - AO contended that profit from Power Plant has been abnormally shown at a higher figure only for the purpose of claiming deduction u/s.80lA - assessee unable to substantiate profit in accordance with the expenditure incurred - Held that - Provisions of section 271(1)(c) apply when there is concealment of the particulars of the income or inaccurate particulars are furnished. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. Making an incorrect claim cannot tantamount to furnishing inaccurate particulars. Denial of deduction u/s 80IA as confirmed by the Tribunal was on the obvious claim of deduction when the gross income did not include the power supplied at the rate given by the Electricity Regulatory authority. Same could not trigger the invoking the provisions of Section 271(1)(c) - Decided in favor of assessee

Summary

Issues:
Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2006-07.

Detailed Analysis:

Issue 1: Levy of Penalty under Section 271(1)(c)
The appeal by the assessee was focused on the solitary issue regarding the penalty imposed under Section 271(1)(c) for the Assessment Year 2006-07, which was confirmed by the CIT(A). The assessee had initially filed a return disclosing a total income and later revised it due to a claim of expenditure under Section 35AC. The scrutiny assessment was completed, disallowing a deduction claimed under Section 80IA, leading to the imposition of a penalty by the Assessing Officer. The CIT(A) upheld the penalty, prompting the appeal before the Tribunal.

Issue 2: Arguments of the Assessee
The counsel for the assessee argued that the penalty should be canceled as the disallowance of the deduction under Section 80IA did not amount to furnishing inaccurate particulars. The counsel highlighted that the claim was based on legitimate grounds and that the denial of the deduction should not trigger penalty provisions. Citing relevant legal precedents, the counsel contended that the claim made in the return, even if not sustainable, did not constitute furnishing inaccurate particulars.

Issue 3: Revenue's Position
The CIT-DR opposed the assessee's arguments, stating that the disallowance of the deduction under Section 80IA constituted furnishing inaccurate particulars. The revenue contended that the failure to provide separate books of account for the eligible business led to inaccurate particulars being furnished, justifying the penalty imposition.

Issue 4: Tribunal's Decision
After considering the rival contentions, the Tribunal analyzed the provisions of Section 271(1)(c) and emphasized that making an incorrect claim did not automatically amount to furnishing inaccurate particulars. The Tribunal noted that unless the details supplied in the return were found to be inaccurate, the penalty provision could not be invoked. The Tribunal held that the denial of the deduction under Section 80IA did not constitute furnishing inaccurate particulars, as the claim was separate and based on legitimate grounds. The Tribunal referred to the Supreme Court's decision in CIT v. Reliance Petroproducts Pvt. Ltd. to support its conclusion. Consequently, the Tribunal set aside the penalty imposed under Section 271(1)(c).

Outcome:
The Tribunal allowed the appeal of the assessee, canceling the penalty of Rs. 2,55,53,890 levied under Section 271(1)(c) for the Assessment Year 2006-07.