Asit Kumar Dutta Vs ITO (ITAT Kolkata)
The appeal before the Income Tax Appellate Tribunal (ITAT), Kolkata, involved Asit Kumar Dutta against the penalty of Rs.1,17,641/- imposed under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2016-17. The penalty, which represented 100% of the tax sought to be evaded, was levied by the Assessing Officer (AO) and subsequently confirmed by the Ld. CIT(A). The facts of the case indicate that the assessee, a salaried employee of SAIL, Durgapur Steel Plant, initially filed a return declaring an income of Rs.10,37,040/-. A revised return was later filed, reducing the total income to Rs.4,96,170/- by claiming deductions under Section 80DDB and Section 80E of the Act. During the scrutiny assessment under Section 143(3), the AO found these deductions to be incorrectly claimed and added them back to the assessee’s income. Following this disallowance, the AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The assessee’s defence, both before the CIT(A) and the ITAT, centered on the assertion that the incorrect deductions were claimed by a third person by mistake, with no malafide intent, and that all relevant facts were fully disclosed in the original and revised returns.
The ITAT, after considering the submissions, found merit in the assessee’s contention. The Tribunal observed that the assessee had fully disclosed all facts related to the claims in the return of income, and the incorrect deductions were asserted to have been a mistake. Crucially, the assessee admitted the mistake during the scrutiny proceedings and paid the resulting tax liability. The Tribunal referenced the landmark decision of the Hon’ble Supreme Court in CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158, which established that merely making a claim for a deduction—even if the Revenue finds it unacceptable or incorrect—does not, in itself, constitute the furnishing of inaccurate particulars or concealment of income warranting a penalty under Section 271(1)(c). The penalty is not automatic upon disallowance; rather, it requires a finding of deliberate fault on the assessee’s part, such as non-disclosure of facts or furnishing false information.
Applying the judicial precedent and the specific facts—that the assessee was a salaried employee whose income was subject to TDS, the incorrect claim was made by mistake, and full disclosure was present—the ITAT concluded that the assessee should not be penalized. The Tribunal held that since the full facts related to the claim were disclosed in the return, the mistake, which was admitted and rectified by paying the due tax, did not justify the imposition of a penalty for furnishing inaccurate particulars. Consequently, the ITAT set aside the order of the Ld. CIT(A) and directed the AO to delete the penalty of Rs.1,17,641/-. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 15.09.2021 for the AY 2016-17.
2. The only issue raised by the assessee in various grounds of appeal is against the imposition of penalty of Rs. 1,17,641/- being 100% tax sought to be evaded.
3. Facts in brief are that the assessee filed return of income on 8.7.2016 disclosing total income of Rs. 10,37,040/-. Thereafter revised the return of income was filed on 23.03.2018 declaring total income of Rs. 4,96,170/- after claiming deductions under Chapter VI-A. The case of the assessee was selected for scrutiny and during the course of assessment proceedings, the AO found that the assessee has claimed deduction u/s 80DDB of the Act and u/s 80E of the Act by mistake and added back the same to the income of the assessee in the assessment framed u/s 143(3) of the Act vide dated 14.12.2018. The AO initiated penalty proceedings by issuing notice u/s 274 read with Section 271(1)(c ) of the Act for furnishing inaccurate particulars of income on 14.12.2018. None appeared in response to the said notice and thus penalty was imposed at Rs. 1,17,641/- in the penalty order passed u/s 27()(c ) of the Act4.
5. In the appellate proceedings, the Ld. CIT(A) has simply dismissed the appeal of assessee.
6. The Ld. A.R submitted before the bench that the assessee is a very old person and his return of income was revised claiming deduction by mistake and there was no malafide on the part of the assessee which has been accepted by the AO in the assessment proceedings. The Ld. A.R submitted that all the facts qua the said claim were duly shown/disclosed in the return of income. The Ld. A.R submitted that the said claim was made by mistake by third person for which the assessee cannot be penalized. The Ld. A.R also submitted that the assessee was a salaried employee with SAIL, Durgapur Steel Plant. The ld AR contended that the assessee has not concealed any thing in the return of income and whatever taxes were directed by the AO to be paid in the assessment proceedings were paid. The ld AR submitted that no penalty is leviable where the assesse has disclosed all facts in the return of income or claimed a deduction which according to the revenue is incorrect or wrong. In defense of this arguments the Ld. A.R relied on the decision of Hon’ble Supreme court in the case of CIT v. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158wherein it has been held that the assessee has made the claim which may not be acceptable to the revenue, cannot be the ground for making penalty u/s 271(1)(c ) of the Act.
7. The Ld. D.R on the other hand relied on the order of the authorities below by submitting that there was an intentional and malafide on the part of the assessee in revising the return of income and therefore the penalty was rightly imposed by the AO and confirmed by the ld CIT(A).
8. After hearing the rival contentions and perusing the material on record, we find that the assessee has disclosed all the facts qua the said claim in the return of income which has been claimed by mistake as has been stated by the assesse and also accepted by the AO to have happened by mistake. The assessee is a salaried employee who was working with SAIL, Durgapur Steel Plant and income has been subjected to TDS at source. During the year, the assessee has claimed this deduction by mistake however in the scrutiny proceedings the assessee admitted the deduction to be claimed by mistake and paid due tax thereon. Considering these facts and circumstances of the case we are of the view that the assessee cannot be penalized for the mistake qua which the full disclosure has been made in the return of income accordingly we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition.
9. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 16th June, 2023
