2017 (11) TMI 212 - AT - Income Tax

Penalty u/s 271(1)(c) - as per AO act of claiming set off of loss against capital gains was an act of furnishing of inaccurate particulars of income - Held that - With regard to the provisions of section 271(1)(c) of the Act, pertaining to penalty, the Hon ble Apex Court in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) has authoritatively laid down that making of a claim by the assessee which is not sustainable will not tantamount to furnishing inaccurate particulars. - Decided in favour of assessee.

Summary

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

Analysis:
1. The appellant contested the penalty imposed under section 271(1)(c) amounting to ?15,45,387, asserting that the claim for short-term capital loss was made in good faith, and therefore, no penalty should be levied. The appellant argued that the loss on redemption of units was admissible except for the deeming provision under section 94(7) of the Act. The appellant relied on legal precedents to support the claim that making an unsustainable claim does not amount to furnishing inaccurate particulars of income. The appellant maintained that all material facts were disclosed in the return of income, and thus, no inaccurate particulars were furnished.

2. The Departmental Representative contended that the penalty was rightly imposed, emphasizing that ignorance of the law cannot be an excuse. It was argued that the appellant's incorrect claim for capital loss warranted the penalty. The Departmental Representative supported the penalty upheld by the Ld. CIT (Appeals).

3. The ITAT referred to the decision of the Hon'ble Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd., emphasizing that for the penalty under section 271(1)(c) to apply, there must be a concealment of income particulars or furnishing of inaccurate particulars. The ITAT highlighted that making an incorrect claim in law does not amount to furnishing inaccurate particulars. The ITAT concluded that in the present case, the claim for set off of loss against capital gains did not constitute furnishing inaccurate particulars. Therefore, the ITAT set aside the penalty imposed by the lower authorities, following the Supreme Court's judgment.

4. The ITAT allowed the appeal of the assessee and directed the Assessing Officer to delete the penalty of ?15,45,387 imposed under section 271(1)(c) of the Income Tax Act, 1961.

This comprehensive analysis highlights the legal arguments, precedents cited, and the final decision of the ITAT in setting aside the penalty on the grounds of inaccurate particulars of income.