Genuine expenses wrongly claimed as deduction not attract penalty u/s 271(1)(c) for furnishing the inaccurate particular of income
ABCAUS Case Law Citation:
ABCAUS 3217 (2019) (01) ITAT
Important case law relied upon by the parties:
CIT V/s Zoom Communications Limited 327ITR 510
CIT Vs. Reliance Petro Products Ltd reported in 322 ITR 158
In the instant case the appeal had been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals) confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 (“the Act”).
The assessee was a limited company. For the year under consideration, it filed its return of income declaring loss. Subsequently the assessment was framed under section 143(3) of the Act after making certain additions/ disallowances of various claim made by the assessee in the return of income including the guesthouse expenses.
Subsequently the matter travelled up to ITAT wherein the confirmation of guesthouse expenses was made.
Accordingly, the Assessing Officer (AO) provided fresh opportunity to the assessee for levying the penalty under section 271(1)(c) of the Act on the confirmation for the addition made by the ITAT.
As per the AO, the assessee was not entitled for the deduction of guesthouse expenses which were claimed by it in the income tax return. Accordingly he was of the view that the assessee had furnished inaccurate particulars of income. Had the case of the assessee not been selected under scrutiny, claim of the assessee would not have been detected. Accordingly the AO charged the assessee for furnishing the inaccurate particular of income and levied the penalty under section 271(1)(c) of the Act.
The CIT(A) confirmed the order of the AO.
The Tribunal observed that the assessee in the year under consideration had claimed guesthouse expenses including the depreciation on such guesthouse building and other assets maintained therein. The assessee against such guesthouse expenses has shown recoveries leaving a shortfall which was claimed as deduction in the profit and loss account.
Thus the issue was whether the assessee had furnished inaccurate particulars of income by claiming the guest house expenses incurred by it.
The Tribunal noted that the wrong claim made by the assessee for the guest house expenses in the income tax return could not be equated with inaccurate particular of income. It was because the genuineness of the guest house expenses incurred by the assessee was not in doubt, but the same was wrongly claimed in the profit and loss account.
The Tribunal opined noted that had there been some more recoveries against the guest house expenses, then there would not have been any disallowance of such expenses. Thus the assessee had not deliberately claimed such expenses.
No penalty 271(1)(c) for genuine expenses wrongly claimed as deduction
Relying on the judgment of the Hon’ble Supreme Court, the Tribunal opined that once the assessee had furnished all the particulars of expenses which were correct but wrongly claimed as deduction, it did not attract the penalty.
Accordingly, it was held that the assessee had made the wrong claim for the guest house expenses. But the wrong claim did not mean that the assessee had furnished inaccurate particular of income.
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