C.I.T.,AHMEDABAD vs. RELIANCE PETROPRODUCTS PVT.LTD

C.A. No.-002463-002463 - 2010Supreme Court17 March 201010 pages
For Petitioner: B. V. BALARAM DASFor Respondent: K. R. SASIPRABHU
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the assessee is not liable to pay the penalty under Section 271(1)(c) of the Income Tax Act. The Court reasoned that the words 'concealed the particulars of his income' or 'furnished inaccurate particulars of such income' in Section 271(1)(c) must be interpreted strictly. The Court emphasized that 'inaccurate particulars' refers to details supplied in the return that are not accurate, exact, correct, or according to truth. In this case, there was no finding that any details supplied by the assessee in its return were incorrect or erroneous. The Court clarified that merely making a claim that is not sustainable in law, by itself, does not amount to furnishing inaccurate particulars. The assessee had furnished all the details of its expenditure and income in its return, and these details were not found to be inaccurate. It was up to the authorities to accept the claim or not. The Court stated that if the Revenue's contention were accepted, every return where a claim is not accepted would invite penalty under Section 271(1)(c), which is not the intendment of the legislature. The Court found that the Commissioner (Appeals), Tribunal, and High Court had correctly reached this conclusion. Therefore, the appeal filed by the Revenue was dismissed.

What were the facts?

The assessee, Reliance Petroproducts Pvt. Ltd., filed its return for Assessment Year 2001-02 declaring a loss. The assessment was finalized under Section 143(3) with an addition for interest expenditure, leading to penalty proceedings under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars. The assessee claimed interest expenditure on loans taken to purchase IPL shares, from which no dividend income was earned. The assessee had claimed disallowance of this expenditure under Section 14A. The assessee contended that all details in the return were correct, and the disallowance was a difference of opinion, not concealment. The Revenue appealed against the deletion of penalty by the Commissioner (Appeals), which was upheld by the Income Tax Appellate Tribunal and the High Court.

What were the issues?

1. Whether the assessee is liable to pay a penalty of Rs. 11,37,949/- under Section 271(1)(c) of the Income Tax Act, 1961, for allegedly concealing particulars of income or furnishing inaccurate particulars of income, when the Assessing Officer made an addition in respect of interest expenditure? Assessee's Contentions: - The details provided in the return were correct, and there was no concealment or furnishing of inaccurate particulars. - The disallowance by the Assessing Authority was a result of a difference of opinion on the same set of facts, not indicative of concealment. - Mere disallowance of a claim in assessment proceedings cannot be the sole basis for levying penalty under Section 271(1)(c). - Making a claim that is rejected does not automatically make the assessee liable under Section 271(1)(c). - The language of Section 271(1)(c) must be strictly construed, and the assessee's case does not fall within its ambit as there was no concealment or inaccurate particulars submitted. - Submitting an incorrect claim in law does not amount to furnishing inaccurate particulars. Revenue's Contentions: - The Commissioner (Appeals), Tribunal, and High Court ignored the positive language of Section 271(1)(c). - The claim for interest expenditure was without legal basis and made with malafide intentions. - The claim for interest expenditure was not accepted by the Assessing Authority or Commissioner (Appeals), indicating it had no basis. - The expenditure on interest could not have been claimed in law under Section 36(1)(iii) as it was not in respect of capital borrowed for business purposes. - Section 14A provides that no deduction can be allowed for expenditure incurred in relation to income not forming part of total income. - The assessee made a claim that was unacceptable in law, thereby inviting the provisions of Section 271(1)(c).

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 14A,Section 36(1)(iii),Section 10(33)

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Cause title — parties, addresses and appearances
“REPORTABLE” IN THE SUPREME COURT OF INDIA (CIVIL APPELLATE JURISDICTION) CIVIL APPEAL No. 2463___OF 2010 (Arising out of SLP (C) No.27161 of 2008) C.I.T., Ahmedabad …. Appellant Versus Reliance Petroproducts Pvt. Ltd. …. Respondent

J U D G M E N T V.S. SIRPURKAR, J.

1.

Leave granted.

2.

The only question in this appeal which has been filed by the Commissioner of Income Tax-III is as to whether the respondent-assessee is liable to pay the penalty amounting to Rs.11,37,949/- under Section 271(1)(c) of the Income Tax Act (hereinafter referred to as “the Act”) ordered by the Assessing Authority. The Commissioner of Income Tax (Appeals), however, deleted the said penalty. The order of the Commissioner (Appeals) was appealed against before the Income Tax Appellate Tribunal (hereinafter referred to “the Tribunal”) which confirmed the order of the Commissioner (Appeals) and dismissed the appeal filed by the Revenue. However, the Revenue challenged the said order before the High Court which confirmed the orders passed by the Commissioner (Appeals) and the Tribunal while dismissing the Tax Appeal filed by the Revenue.

3.

Few facts would be relevant.

4.

The assessee

The order continues below.

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