In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal held that penalty proceedings under section 271(1)(c) of the Incme Tax Act, 1961 cannot be initiated against the assessee on the sole ground that the claim made by him is rejected by the Assessing Officer. The Tribunal, based on the ruling of the apex Court, observed that an unsustainable claim made by the assessee in the return of income cannot be inferred as the assessee has filed inaccurate particulars of income.In the opinion of the Tribunal, this was certainly not the legislative intent behind the said provision.
Briefly explaining the facts of the case, the Assessing Officer rejected the return filed by the assessee and completed assessment making addition of unexplained cash credit. Consequently, penalty proceedings were initiated against the assessee by holding that the assessee has concealed income and has filed inaccurate particulars while filing return. Subsequently, a penalty order was passed against the assessee under section 271(1)(c) of the Act, which was challenged before the Commissioner of Income Tax (Appeals) who sustained the order. Thereafter, the impugned order was challenged before the Appellate Tribunal.
The Judicial Member of the Tribunal noted that “I find that in this case no satisfaction for concealment was recorded for penalty of Rs.7,60,512/-I further note the AO observed that assessee furnished inaccurate particulars of its income and is liable for penalty u/s 271(1)(c), which did not establish from the facts and circumstances of the case that how the assessee has furnished inaccurate particulars of its income. Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In this regard, I draw my support from the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC) wherein the Hon’ble Supreme Court has held that ‘where there is no findings that any details supplied by the assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting the penalty u/sec. 271(1)(c) of the Income Tax Act. A mere making a claim, which is not sustainable in law, by itself, will not amount of furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to furnishing a inaccurate particulars of income. As the assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely, because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty u/sec. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c). That is clearly not the intendment of the Legislature”.
Read the full text of the order below.
