The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has decided to delete the penalty under Section 271(1) of the Income Tax Act, as it found no inaccuracies in the particulars furnished in the Income Tax Return.
The assessment under Section 143(3) of the Income Act was completed on 08-12-2017 determining the total income at Rs. (-) 4,34,04,640/-. The Assessing Officer made disallowance under Section 36(1)(iii) of the Income Tax Act, amounting to Rs. 12,68,946/- where the penalty proceedings were initiated u/s. 271(1)(c) of the Income Tax Act, for furnishing inaccurate particulars of income.
The Assessing Officer issued show cause notice dated 08-12-2017 for which the assessee replied vide letter dated 28-12-2017. After taking cognizance of the said reply, the Assessing Officer levied a penalty of Rs. 3,92,100/- u/s. 271(1)(c) of the Income Tax Act, in respect of furnishing inaccurate particulars of income and concealing its income.
S.N. Divatia and Samir Vora representing the assessee, submitted that the assessee was under bonafide belief and the same should not be treated as concealment of income and furnishing inaccurate particulars of income. The counsels further submitted that the penalty notice under Section 274 r.w.s. 271 of the Income Tax Act, 1961 has not specified under which limb of section 271(1)(c) of the Income Tax Act, the penalty was being levied.
The counsel for the revenue Saumya Pandey Jain relied on the decision of Supreme Court in case of Dharmendra Textile and further submitted that the assessee did not disclose true amount of income voluntarily and therefore the same was rightly coming under the purview of section 271(1)(c) of the Income Tax Act
The tribunal, of Suchithra Kamble observed that the Supreme Court in the case of Reliance Petro-Product Pvt. Ltd. clarified that “inaccurate particulars” refer to details in the return that are not precise or correct. As the Assessing Officer did not find any inaccuracies or false details supplied by the assessee, Section 271(1)(c) of the Income Tax Act, cannot be invoked. Moreover, the assessee provided detailed calculations during the assessment proceedings regarding interest on borrowed funds, which were subsequently added by the Assessing Officer.
Therefore, it cannot be concluded that the assessee furnished inaccurate or concealed particulars of income, even though the mistake was made inadvertently and not disclosed in the return. Additionally, the notice lacked specification of the particular limb of Section 271(1)(c) of the Income Tax Act, as highlighted in the case of CIT vs. SSA’s Emerald Meadows, thus the assessee’s appeal was upheld and the penalty was deemed nullified
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