No Penalty when the Assessee makes an Untenable Claim on the advice of Professional and later offers Income to Tax: Madras HC [Read Judgment]

Imposing Penalty - ITAT - Taxscan

In CIT v. Anita Kumaran, the division bench of the Madras High Court held that penalty under section 271(1)(c) of the Income Tax Act cannot be levied when the assessee, on the advice of the Professional, had made an untenable claim and subsequently, offers the income to tax.

During the course of re-assessment, the assessee offered to include the sum expended on travel for determining taxable income and paid tax along with interest accordingly. The grievance of the assessee is that the Department issued penalty under section 271(1)(c) of the Income Tax Act on conclusion of the re-assessment proceedings. Though the first appellate authority dismissed the appeal, the Appellate Tribunal accepted the contention of the assessee. Therefore, the Revenue approached the High Court for relief.

Diving deeply into the facts of the case, the bench comprising Justice Rajiv Shakdher and Justice M. sunder noted that due to a mistake on the part of the accountant, the assessee wrongly claimed deduction for the expenditure incurred on travelling under Section 57 of the Income Tax Act from her business income. on realizing the mistake, the said sums were offered for tax and, accordingly, both tax and interest was paid by the Assessee.

In the opinion of the bench, the Tribunal has appreciated the above aspects of the matter and come to the conclusion that the matter in issue would not come within the scope of Section 271(1)(c) of the Income Tax Act, as it was not a case of furnishing inaccurate particulars.

The bench further said that “It was, essentially, a case, where, an untenable claim for deduction of travel expenditure under Section 57 of the Act had been made and that too based on the advise of a professional, i.e., an Accountant.”

Read the full text of the Judgment below.

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