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| DATE: | July 8, 2013 (Date of publication) |
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| Click here to download the judgement (nalin-shah_penalty_unsustainable_claim.pdf) |
No s. 271(1)(c) penalty even for unsustainable/ non-debatable claims if there is disclosure in the return
Though the income from the transfer of units of a mutual fund is exempt u/s 10(33), the assessee claimed a deduction for the loss of Rs. 3.08 crores suffered by him on transfer of US 64 units. The AO disallowed the loss on the ground that the exemption in s. 10(33) applied to a loss as well and imposed penalty u/s 271(1)(c). The CIT(A) confirmed the penalty. On appeal by the assessee, the Tribunal allowed the appeal on the ground that as the assessee had disclosed the details with the return, he had not filed inaccurate particulars of his income and that the making of a wrong claim / incorrect claim did not attract penalty u/s 271(1)(c). On appeal by the department to the High Court, HELD dismissing the appeal:
As the assessee had disclosed all details in the return of income, at the highest it can be said that the claim of the assessee was not sustainable in law. But as there was no furnishing of inaccurate particulars or concealment of income on the part of the assessee. penalty u/s 271(1)(c) could not be levied (Reliance Petroproducts 322 ITR 158 (SC) referred).
Fantistic order by the Hon’ble Sanjay Arora. On the issue would like to highlight the penalty u/s 271(1)(c) can be imposed on any or both defaults i.e. (i) concealment of the particularls of income and (ii) furnishing of inaccurate particulars of income. To levy penalty u/s 271(1)(c) mere concealment of income is not enough but concealment of particulars of income is very necessary. In this regard the satisfaction of the assessing officer about the nature of default at the time of initiation of the penalty is very important. [CIT-v- Lakhdhir lalji 85 ITR 77(Guj)]. Thus, there must be a clear finding about the charge of penalty. It is incumbent upon the AO to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. In the absence of such finding, the order would be bad in law.—Manu engg. Works 122 ITR 306(Guj), New Sorathia Engg. Co 282 ITR, 642(Guj), Padma Ram Bharali 110 ITR 54(Gau).
In the latest decision of the ITAT the basis of the initiation/ imposition of the penalty was not appeared. If the penalty was initiated or imposed for furnishing inaccurate particular of inocme, the same cannot be sustainable even as per finding recorded in the latest order of Hon’ble ITAT.
There are so many contradictory decisions that it is high time to amend the provisions of Sec. 271(1)(c)