VILLO NOSHIR ANKLESARIA,,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 4,, PUNE

At the time of hearing, none appeared on behalf of the assessee. The submissions of the Ld. DR were recorded and appeal of the assessee was heard on merits.

The brief facts in this case are that the assessee is an individual and derived income from house property, profit and gains of business & profession and other sources. The assessee has filed return of income on 31.10.2007 declaring total income of Rs.14,46,578/- and the total income was assessed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) to Rs.58,98,783/- by the Assessing Officer on 29.12.2009. The Assessing Officer also imposed penalty of Rs.9,37,580/- u/s.271(1)(c) of the Act on 29.03.2012. 4. In this case, penalty was levied u/s.271(1)(c) of the Act for making certain wrong claims in the return of income. There is no finding of the Assessing Officer or the Ld. CIT(Appeals) regarding the concealment of income or furnishing of inaccurate particulars of income. The only reason for imposing penalty u/s.271(1)(c) of the Act was that claim made by the assessee for deduction u/s.54F of the Act was not correct claim as per observation of the Department.

The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn.) has opined that since penalty proceedings are separate proceedings than that with assessment, the charges must be specific and facts and circumstances should demonstrate that there is concealment of income or furnishing of inaccurate particulars of income. In another case of CIT v. SSA’s Emerald Meadows [2016] 73 taxmann.com 241, wherein the Hon‟ble Karnataka High Court following its own decision in the case of CIT v. Manjunatha Cotton & Ginning factory (supra) took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The charge has to be specific in accordance with the facts of the case.

Further, the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. (322 ITR 158) (SC) wherein after going through the meaning of the words “furnishing of inaccurate particulars” has held as under;  Mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claims made in the return of income cannot amount to furnishing of inaccurate particulars.  Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself, would not attract penalty u/s. 271(1) (c) of the Income Tax Act.  Unless there is a finding that any details supplied by the assessee in its return of income were found to be incorrect or erroneous or false, there is no question of levying penalty u/s. 271(1)(c).  If the contentions of the revenue are accepted, then in case of every return where claim is not accepted by the Assessing Officer

It is quite evident that assessee had declared the full facts; the full factual matrix or facts were before the Assessing Officer while passing the assessment order. It is another matter that the claim based on such facts were found to be inadmissible. This is not the same thing as furnishing inaccurate particulars of income as contemplated under Section 271(1) (c) of the Act.

In view of the judicial pronouncements referred above, it is settled proposition of the law that a misconceived or wrong claim for deduction or exemption in the return of income filed does not automatically attract penalty under Section 271(1)(c) of the Act. Just for making wrong claims made advertently or inadvertently, therefore, penalty cannot be levied u/s.271(1)(c) of the Act and further the Lower Authorities have not given any findings regarding either “concealment of income” or “furnishing of inaccurate particulars of income” by the assessee. We are of the considered view, this is not a fit case for imposing penalty and accordingly, we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the penalty from the hands of the assessee.

In the result, appeal of the assessee is allowed.

The CIT (Appeals)-7, Pune.

The CIT-6, Pune. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “बी” बेंच, 5. पुणे / DR, ITAT, “B” Bench, Pune. गार्ा फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER,