Case Law Details
Recently Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. (Taxpayer), [2010-TIOL-21-SC-IT] held that merely making a claim in the return of income which is not accepted by the Tax Authority or which is not sustainable under the ITL, in itself, does not amount to furnishing inaccurate particulars by the Taxpayer and, hence, is not liable to penalty.
Background and facts of the case
Under the ITL, a taxpayer is liable to penalty if it furnishes inaccurate particulars of income or conceals income.
The Taxpayer, an investment company, filed its return of income for tax year 2000- 01, declaring loss. The Taxpayer paid interest on funds borrowed for investing in shares. For the relevant tax year, dividend income was not taxable in the hands of the Taxpayer. The Taxpayer claimed the amount of interest paid as an expense in its return of income.
During the assessment proceedings, the Tax Authority disallowed interest expense on the ground that this expense was incurred in relation to dividend income which was exempt from tax.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Revenue authorities are quick to initiate penalty proceedings in a mindless manner. There are as many cases of genuinely incorrect claims made by assessees which do not warrant harassment through penalty proceedings. This judgment will help in reducing such cases, assuming of course that ITO’s pay heed to the same. As we all know, Revenue authorities are quick to waste the tax payers funds in mindless litigation as they are not accountable and do not care what the results may be.
I fully agree with the statement of MRK Gandhi.
The ruling of supreme court only emboldens the assesses. No one desires that inadvertent acts should be punished and if a tax payers makes willful mis- declaration he cannot be excused. Therefore, a blanket waiver will lead to repeat attempts of tax payers to evade tax and there is no denial that the taxing officials should also be vigilant. In any event, the law cannot support evil intentions; if they are manifest.