2024 (12) TMI 1380 - AT - Income Tax

Levy of penalty u/s.271(1)(c) - case was reopened u/s.147 for the reason that the some of the equity-oriented funds were not covered u/s.10(38) to claim the exemption - assessee submitted that it had inadvertently claimed exemption u/s.10(38) in respect of 10 transactions being transactions related to 10 debt mutual funds but in fact the assessee was eligible for indexation on these funds and if the indexation benefit is worked out it would result in a Capital Loss which it ought to have claimed - HELD THAT - We note that the assessee s return of income was accepted by the AO in two assessment orders without any additions. Hence, it is admitted fact that the AO has not found any mistake / errors in the income declared / offered by the assessee. In this case, even if the computation has been properly made, then there would be no escapement of income and hence reopening should have been dropped and consequently no penalty can be imposed on the reassessment order. Therefore, the action of the AO and that of the CIT(A) cannot be countenanced. Assessee s reliance on the decision of Reliance Petro products Limited 2010 (3) TMI 80 - SUPREME COURT that making inaccurate claim in law cannot tantamount to furnishing inaccurate particulars is applicable to the present case as all the details of capital gain transactions in dispute are very much part of the Return of Income along with the Schedules. We are of the considered opinion that, the penalty u/s.271(1)(c) is not warranted and hence we are inclined to delete the same. Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment revolves around the following core legal questions:

• Whether the delay of 294 days in filing the appeal by the assessee can be condoned.
• Whether the penalty under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income is justified when the assessee made an incorrect claim under Section 10(38).
• Whether the reopening of assessment under Section 147 was valid given that there was no variation between the returned and assessed income.
• Whether the assessee's actions constituted furnishing inaccurate particulars of income, thereby justifying the imposition of penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

• Relevant Legal Framework and Precedents: The tribunal considered the principles of natural justice and reasonable cause for delay.
• Court's Interpretation and Reasoning: The tribunal found that a reasonable cause was demonstrated by the assessee for the delay in filing the appeal.
• Key Evidence and Findings: The tribunal accepted the reasons presented by the assessee for the delay.
• Application of Law to Facts: The tribunal applied principles of equity and justice to condone the delay.
• Conclusions: The delay was condoned, and the appeal was admitted for adjudication.

Penalty under Section 271(1)(c)

• Relevant Legal Framework and Precedents: The tribunal referred to Section 271(1)(c) concerning penalties for inaccurate particulars and the precedent set by CIT Vs Reliance Petroproducts Limited.
• Court's Interpretation and Reasoning: The tribunal noted that the mere making of a claim not sustainable in law does not amount to furnishing inaccurate particulars.
• Key Evidence and Findings: The tribunal observed that all transactions were disclosed in the return, and the claim under Section 10(38) was made inadvertently.
• Application of Law to Facts: The tribunal applied the precedent that incorrect claims do not automatically lead to penalties if there is no concealment or inaccuracy in the particulars provided.
• Treatment of Competing Arguments: The tribunal dismissed the Revenue's argument that the incorrect claim amounted to furnishing inaccurate particulars.
• Conclusions: The penalty under Section 271(1)(c) was not warranted and was deleted.

Reopening of Assessment under Section 147

• Relevant Legal Framework and Precedents: The tribunal considered the provisions under Section 147 regarding income escaping assessment.
• Court's Interpretation and Reasoning: The tribunal emphasized that there was no income escaping assessment as the originally assessed income was accepted.
• Key Evidence and Findings: The tribunal found no discrepancy between the returned and assessed income.
• Application of Law to Facts: The tribunal applied the legal standards for reopening assessments and found them unmet.
• Conclusions: The reopening of the assessment was not justified, and the penalty based on such reopening was invalid.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "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 the assessee."
• Core Principles Established: The tribunal reinforced that incorrect legal claims do not automatically equate to furnishing inaccurate particulars unless there is a deliberate act of concealment or misrepresentation.
• Final Determinations on Each Issue: The tribunal allowed the appeal, condoned the delay, and deleted the penalty imposed under Section 271(1)(c).

The final judgment emphasized the importance of distinguishing between inadvertent legal claims and deliberate inaccuracies, thereby protecting taxpayers from undue penalties when there is no evidence of concealment or deliberate misrepresentation of facts.