Mere making of claim, which is not sustainable in law, by itself, not amount to furnishing inaccurate particulars
Whether the ITAT was justified in confirming penalty under Section 271(1)(c) of the Income Tax Act, 1961 on the ground that assessee has furnished inaccurate particulars of income for claiming depreciation on building.
Held that there is no finding recorded by assessing officer that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. 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.
Whether penalty should be imposed u/s 271(1)(c) when a debatable and arguable legal issue is decided against the assessee and the assessee had disclosed full and correct facts.
Claim for depreciation is a technical claim based on interpretation of legal provision. Legal opinion, in such cases, is frequently given by Chartered Accountants to help the company to prepare its return of taxable income; 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; divergent legal views on legal interpretation of a statute can take place, but it is not necessary that there should be uniformity or consensus of opinion on the aspects of law. Assessee cannot be faulted and penalty should not be imposed because the assessee had taken a particular stand point, unless there are grounds or reasons to show that the assessee had not disclosed all the facts before the departmental authorities concerned.
HIGH COURT OF DELHI
ITA 1152/2011
KARAN RAGHAV EXPORTS PVT. LTD.
versus
COMMISSIONER OF INCOME TAX
O R D E R – 14.03.2012
Vide order dated 12th January, 2012, the following substantial question of law was framed:-
“Whether the Income Tax Appellate Tribunal was justified in confirming penalty of Rs.16,34,673/- under Section 271(1)(c) of the Income Tax Act, 1961?”
2. The present appeal under Section 260A of the Income Tax Act, 1961 (Act, for short) pertains to the assessment year 2005-06 and impugns the order dated 28th February, 2011 passed by the Income Tax Appellate Tribunal (for short, the tribunal) dismissing ITA No. 5053/Del/2010 filed by the assessee and confirming the penalty under Section 271(1)(c).
3. The appellant is a company and in the return of income filed for the assessment year in question it had claimed depreciation on building, which was being used by the partnership firm in which the assessee was a partner. The total claim for depreciation was Rs. 41,62,650/-. It is not in dispute and it is accepted that in the quantum proceedings it has been held that the assessee is not entitled to depreciation on the building as the same was being used by the partnership firm and not by the assessee company. The aforesaid addition/dis allowance made by the Assessing Officer has been confirmed by this Court vide decision dated 1st November, 2010 in ITA No. 955/2010. The relevant portion of the said decision will be referred to and examined later on.
4. The question, which arises for consideration, is that whether the assessee has been able to discharge onus under Explanation 1 to Section 271(1)(c) of the Act. Section 271(1)(c) postulates and mandates imposition of penalty for concealment of income or furnishing of inaccurate particulars of income. Explanation (1) to Section 271(1) (c) stipulates when penalty under the said Section should be imposed and reads as under:-
“Explanation 1 : 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.
5. The aforesaid explanation has come up for consideration and has been interpreted and elucidated by the Supreme Court and this Court. It has been held that imposition of penalty under the said Section is not akin to or like criminal proceedings and the question of mens rea or mala fides on the part of the assessee need not be examined and is not relevant. However, at the same time, it is not mandatory that in each case wherein addition or disallowance is made by the Assessing Officer, penalty must and should be imposed. When an assessee establishes and shows that he had acted bona fidely and all facts and material were disclosed by him penalty should not be imposed. (see clause B to Explanation 1)
6. In the present case, the assessee entered into and was inducted as a partner in a partnership firm, namely, Gaurav International vide partnership deed dated 1st April, 2001. It was agreed that the factory premises located at 225, Udyog Vihar, Phase-1, Gurgaon would be used by the partnership firm for their business. The said property belongs to the appellant. However, the ownership of the property was not transferred to the partnership firm. The appellant-assessee continued to be the owner of the said property. Only right to use was given to the partnership firm.
7. Along with the return of income, the appellant-assessee had filed a table disclosing income from business. The relevant portion of the said table reads as under:-
