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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: Shri R.C. Sharma, & Shri Sandeep Gosain
Per Sandeep Gosain, JM :
The present appeal has been filed by the assessee against the order passed by learned CIT(A) 11, Mumbai dated 25-06-2012 for A.Y 2007-08 on the following grounds:- Learned Commissioner of Income Tax (Appeals) erred in confirming 1) penalty levied u/s. 271(1)(c ) of the Act by Learned Assessing Officer on the plea that the appellant has failed to explain why and under what circumstances the claim of deduction of interest expenses was made and accordingly furnished inaccurate particulars of income. Appellant submits that in view of the facts and circumstances of the case as well as in law the said penalty levied u/s. 271(1) ( c) of the Income Tax Act, 1961 is bad in law and deserves to be deleted.”
Brief facts of the case are that the assessee being individual deriving her income from salaries, interest and share of profits and remuneration earned from firms in which she is a partner. The assessment proceedings in this case was completed on 30-11- 2009 u/s. 143(3) of the Act determining total income at Rs.580241 as against returned income of Rs.2,76,463/-. During the course of assessment proceedings, penalty proceedings u/s. 271(1) ( c ) were initiated for furnishing inaccurate particulars of income and concealment of income. Accordingly the penalty u/s. 271(1)( c) of the Act was initiated by issuance of notice u/s.271(1)( c ) of the Act by observing as under:- “Notice u/s. 271(1)( c ) r.w.s 274 dt. 30.11.2009 and further notice dated 13.5.2010 were issued and served on the assessee asking him to show cause as to why the penalty u/s. 271(1) ( c ) should not be levied for the aforesaid furnishing of inaccurate particulars and thereby concealment of income. “ 3.1 During the course of penalty proceedings u/s. 271(1) ( c) the AO found that the interest expenses being used for purchase of shares is not utilized for earning interest income. For furnishing inaccurate particulars of income, the AO levied the penalty. Before him the assessee filed its reply vide letter dated 28-05-2010 stating that there is no concealment of income. The AO was of the view that the interest expenses are utilized for share trading being capital in nature, which was set off against salary income thereby reducing the taxable income. Therefore, for furnishing of inaccurate particulars, it falls within the ambit of penalty proceedings u/s. 271(1) ©. Accordingly, he levied the same at Rs.45,522/-.
Aggrieved by the penalty order the assessee filed appeal before learned CIT(A). Learned CIT(A) after considering the various submissions of the assessee and by relying on the various judgments of various courts he upheld the order of the AO in levying the impugned penalty.
Aggrieved by the order of learned CIT(A) the assessee preferred appeal before the Tribunal.
At the very outset learned AR appearing on behalf of the assessee reiterated the same submissions as made before the CIT(A). He also argued that the case of the assessee of the assessee is squarely covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case CIT Vs. Reliance Petroproducts Pvt. Ltd reported in (2010) 322 ITR 158(SC). On the other hand, the ld.DR appearing on behalf of the revenue has relied on the orders of the lower authorities.
We have heard the rival contentions and perused the material available on record. We have noted that the learned CIT(A) has dismissed the appeal of the assessee by relying on various case laws. It is relevant to reproduce herein below the Explanation 1 to section 271. Explanation 1 to section 271(1) ( c): “Where in respect of any facts material to the computation of the total income of any person under this Act- (A) such person fails to offer an explanation or offers an explanation which is found by the assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, Then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause ( c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. “ 7.1 The ld. CIT(A) has uphold the order of penalty merely on the ground that there is no doubt that the appellant has claimed an inadmissible deduction in the assessment. However, the ld. CIT(A) failed to appreciate that where an agreeable, controversial or debatable deduction is claimed, then the claim could not be said to be false, otherwise, it would become impossible for any assessee to raise any claim or deduction, which might be debatable and it was not the intention of the legislature to make punishable such claim, if they were not acceptable. In the present case, the assessee had disclosed all the material facts and making of each head of income in the return of income filed, which also included deduction of interest expenditure claimed, even the genuineness of expenditure was not doubted by ld.AO but only a different view was taken on Allowability of Interest expenditure from the view taken by the appellant.
7.2 From the above, it could be safely concluded that as per Explanation 1 to section 271 ( c ) of the Act no penalty could be imposed on the assessee in the facts of the case.
7.3. The decision of Hon’ble apex court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 174 (SC) is squarely covered in favour of the assessee, wherein the Hon’ble apex court has held :- “We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster’s Dictionary, the word “inaccurate” has been defined as: ”not accurate, not exact or correct ; not according to truth ‘ erroneous ‘ as an inaccurate statement, copy or transcript.” We have already seen the meaning of the word “particulars” in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.”
In view of the given facts and circumstances and relying on the decision of Hon’ble Apex Court cited supra, we delete the impugned penalty and appeal of assessee is allowed.
In the result, the appeal of the assessee is allowed as stated above. Order pronounced in the open court on 20-07-2016