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Facts
The assessee claimed a deduction under section 10AA of the Income-tax Act, 1961. The Assessing Officer (AO) observed that the assessee did not fulfill the basic conditions for the deduction and also did not claim depreciation on construction, which led to a higher claim than eligible. The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.
Held
The Tribunal held that assessment and penalty proceedings are distinct and separate. A mere claim that is not sustainable in law does not automatically amount to furnishing inaccurate particulars of income. The Tribunal relied on the Supreme Court's decision in CIT vs. Reliance Petroproducts (P) Ltd and a coordinate bench decision where penalty was deleted in similar circumstances.
Key Issues
Whether the assessee furnished inaccurate particulars of income warranting levy of penalty under section 271(1)(c) when the claim for deduction was reduced due to non-claiming of depreciation.
Sections Cited
271(1)(c), 10AA, 32(1)
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Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 10.12.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the Assessment Year (AY) 2015-16, confirming the penalty levied by Assessing Officer (in short, ‘AO’) u/s 271(1)(c) of the Act on 28.06.2018. Grounds of appeal
raised by the assessee are as under: “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals), NFAC has erred in confirming the action of assessing officer in imposing penalty of Rs. 2,60,720/- u/s 271(1)(c) of the I.T. Act, 1961.”
2. It is therefore prayed that penalty imposed by assessing officer and confirmed by Commissioner of Income-tax (Appeals), NFAC may please be deleted.”
Brief facts of the case are that assessee filed its return of income for A.Y 2015-16 declaring total income at Rs.Nil after claiming deduction of Rs.29,58,065/- u/s 10AA of the Act. During assessment proceedings, AO observed that assessee has not fulfilled the basic conditions for availing deduction u/s 10AA of the Act. The assessee did not file Form-56F along with the return of income. The assessee has also not claimed depreciation on construction of Rs.84,37,526/-, due to which claim of deduction u/s 10AA was higher by Rs.8,43,752/- than the eligible amount. As per Explanation 5 to Section 32(1) of the Act, depreciation shall be granted, whether or not the assessee claims the same. The AO accordingly reduced profit by Rs.8,43,752/- and deduction was restricted to Rs.21,43,313/- instead of Rs.29,58,065/-. He also initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income. During the penalty proceedings, the AO observed that by not claiming depreciation deliberately, the assessee has benefited not only from taxation in subsequent year but also the written down value (WDV) remained unchanged, which would save assessee from tax when property is disposed of subsequently. In response to the show cause notice dated 08.12.2017 and reminder dated 01.06.2018, the assessee did not file any reply. Hence, the AO observed that assessee failed to give any justification or acceptable explanation for furnishing inaccurate particulars of income. Therefore, the case falls within the mischief of Section 271(1)(c) of the Act. Accordingly, the AO levied minimum penalty of Rs.2,60,720/-, being @ 100% of the tax sought to be evaded.
Aggrieved by the order of AO, assessee filed appeal before Ld.CIT(A). The Ld.CIT(A) observed that depreciation amount which was required to be claimed was Rs.8,43,752/- which would reduce the claim of deduction u/s A.Y.15-16 V.M.Maniyar Exports 10AA from Rs.29,58,065 to Rs.21,14,313/-. The assessee has, therefore, furnished inaccurate particulars of income. A bare analysis of the provisions of section 271(1)(c) of the Act makes it evident that where in the case of any proceedings under the Act, the AO is satisfied that any person had furnished inaccurate particulars of income, penal provisions are attracted. Both the expressions “has concealed” and “has furnished inaccurate particulars” have not been defined in the Act. The net effect of both thee expressions is the same, i.e, keeping a portion of the income away from the gaze of the revenue. The former is direct while the latter may be indirect in its execution. The assessee has failed to give any justification or acceptable explanation for furnishing inaccurate particulars of income. The CIT(A) confirmed the action of AO in levying penalty u/s 271(1)(c) of the Act.
Further aggrieved by the order of Ld.CIT(A), the appellant filed present appeal before the Tribunal. The Ld. AR submitted that assessment and penalty proceedings are separate. The addition or disallowance in the assessment proceedings would not automatically lead to levy of penalty u/s 271(1)(c) of the Act. The addition made by the AO was on the basis of the return filed by the assessee. Hence, there was no concealment or furnishing inaccurate particulars of income. The claim of depreciation from income results into reduction of total income, which clearly proves that there is no concealment of income. He submitted that there are number of decisions where it has been held that making of a unsustainable claim, will not amount to furnishing inaccurate particulars of income.
On the other hand, Ld.Sr-DR for the Revenue supported the order of lower authorities.
A.Y.15-16 V.M.Maniyar Exports 6. We have considered the rival submissions of both the partiers and have gone through order of lower authorities carefully. It is well settled that assessment and penalty proceedings are distinct and separate. The findings given in the assessment proceedings is not conclusive regarding levy of penalty. Before penalty can be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represent income and that assessee has concealed the particulars of such income or has furnished inaccurate particulars of such income. The Hon’ble Supreme Court in case of CIT vs. Reliance Petroproducts (P) Ltd (2010) 189 Taxman 322/322 ITR 158 (SC) held that a mere making of claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of assessee. We also find that co-ordinate Bench of this Tribunal in the case of Purshottam Farmers Co.Op. Cotton Ginning & Pressing Society Ltd. vs. DCIT (2023) 155 taxmann.com 191/203 ITD 698 (Surat-Trib.) deleted the penalty by following the above decision. In the said case, the AO made disallowance u/s 80P(2)(d) on account of interest income earned from State Bank of India and Dakshin Gujarat Vij Company Ld. (DGVCL) and levied penalty under section 271(1)(c) on such disallowance. On appeal, the CIT(A) upheld the action of the AO. On the assessee’s appeal to the Tribunal, the assessee contended that no such claim was made by the assessee and that the AO had made disallowance on wrong presumption. Further, in the computation of income attached with the return of income, the assesse furnished all the details. Considering the facts of the case, it was found that neither there was concealment of income nor furnishing inaccurate particulars of income; rather, it was the AO who has not accepted the claim of assesse. Thus, the ratio of decision of Reliance Petroproducts (P) Ltd. (supra) is clearly applicable on the facts of the said case. The Tribunal, accordingly, directed the AO to delete the entire penalty. Since the facts of the instant case are similar, following the decisions of the Hon’ble
In the result, assessee’s appeal is allowed. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 30/05/2025 in the open court.