No concealment penalty for wrong claim on the advice of CA. Even if it was wrong, it could be a good case for addition but not for penalty – Punjab & Haryana High Court
ABCAUS Case Law Citation:
ABCAUS 1296 (2017) (07) HC
The Question framed for determination:
“Whether on the facts and in law, the Hon’ble ITAT is justified in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961 amounting to Rs. 47,77,500 /- ignoring the fact that the assessee had furnished inaccurate particulars of its income by claiming wrong deduction under Section 80IA of the Income Tax Act, 1961 on interest income?”
Assessment Year : 2003-04
Important Case Laws Cited/relied upon:
CIT Vs. Amarnath (2008) 16 DTR (P&H) 326
Commissioner of Income Tax Faridabad Vs. Olympia Electronics Private Limited
Pandian Chemical’s Vs. CIT, (2003) 262 ITR 278
CIT Vs. Sterling Foods, (1999) 237 ITR 579
Commissioner of Income Tax Vs. Reliance Petro Products Private Limited (2010) 322 ITR 158
Brief Facts of the Case:
The respondent assessee was a company. The return of the assessee was processed under Section 143(1).. Subsequently, the case was selected for scrutiny and notice under Section 143(2) of the Act was issued and served upon the assessee on 7.7.2004. The assessee revised its return of income on 01.11.2004 showing the same income as per original return. However, sales tax subsidy, shown as revenue receipt in the original return was reflected as capital receipt in the revised return and consequently the profit under Section 115JB of the Act was recomputed and revised.
During the course of assessment proceedings, it was inter alia noticed by the Assessing Officer (AO) that the assessee had claimed deduction under Section 80IA on this interest income. As the interest income was ‘income from other sources’ and not profit ‘derived from’ an individual industrial undertaking, deduction under Section 80IA of the Act was wrongly claimed by the assessee on this income. The Assessing Officer disallowed the claim of deduction under Section 80IA of the Act on interest income treating it as ‘income from other sources’ and not business income.
The AO also initiated penalty proceedings under Section 271(1)(c) of the Act. The assessee preferred an appeal against the assessment order. However both the CIT(A) and the Tribunal dismissed the ground relating to claim of deduction under Section 80IA of the Act on interest income of Rs. 65,00,000/- as not pressed.
Therefore, it was held by the Assessing Officer that the assessee intentionally and deliberately furnished inaccurate particulars of income on interest income by claiming the same as deduction under Section 80IA of the Act.
Consequently, the AO, levied a penalty @ 200 per cent of the tax sought to be evaded under Section 271(1) (c) of the Act on interest income.
Aggrieved by the order passed under Section 271(1) (c) of the Act, the assessee filed an appeal before the CIT(A) who deleted the penalty. Not satisfied with the order, the revenue filed an appeal before the Tribunal which affirmed the decision of CIT(A) in deleting the penalty and dismissed the appeal filed by the revenue.
Observations made by the High Court:
The High Court noted that the case of the assessee was that the claim was made by revising the return on the advice of the Chartered Accountant. Also, the Tribunal had categorically recorded that even if it was assumed that the claim made by the assessee on the advise of Chartered Accountant was wrong, still it was not a good ground for imposing penalty under Section 271(1)(c) of the Act, as two conditions are required to be satisfied i.e. firstly there should be furnishing of inaccurate particulars and secondly, there must be concealment of income. Even if there was wrong claim, it could be denied by the Assessing Officer. It could be a good case for addition but not for penalty.
It was observed that the Tribunal had concluded that the assessee did not furnish inaccurate particulars with the intention to conceal income and rather it made a claim on the advice of the chartered accountant which was found to be not correct.
The High Court observed that the ITAT had had recorded the findings after appreciating the entire material on record and the relevant provisions of the law and the appellant-revenue could not controvert the findings recorded by the Tribunal.
It was further noted that in the case of Olympia Electronics Private Limited, while dealing with similar issue, the Court had recorded that the issue was a debatable one and the assessee had in its return of Income made a mention by giving a note to the computation of income which was filed alongwith the return of income. It was concluded that in such circumstances, there was no concealment or furnishing of inaccurate particulars.
Also it was noted that Hon’ble Supreme Court in the case of Reliance Petro Products Private Limited had held that mere making of a claim which was ultimately found to be unsustainable may not by itself amount to furnishing of inaccurate particulars regarding the income.
The appeal was dismissed holding that no substantial question of law arises.