TMI Blog2012 (7) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 24-02-2010 for the assessment years 2000-01, 1996-97 and 1998-99. The penalty under dispute was levied by the ACIT (OSD)-I, Range-4, Ahmedabad u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) vide order dated 30-03-2009. Since the common issue is involved in all the three appeals, they were heard together and are being disposed of by a consolidated order. First we take up ITA No.1455/Ahd/2010 A.Y. 1996-97. 2. The Revenue has raised the following grounds of appeal:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the penalty of Rs.404,800/- levied U/s. 271(1)(c) of the Act. 2. The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the assessee was not able to substantiate its wrong claim of technical know-how and failed to prove that the explanation offered in this respect was bonafide and therefore penalty U/s. 271(1)(c) was correctly levied by the A.O as per Explanation 11 to Section 271(1)(c) of the Act. 3. The Ld. CIT(A) has further erred in law and on facts in not taking cognizance of the decision of Hon le Supreme Court in the case of Dharmendra Textiles 306 ITR 277, wherein it is clearly he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Hon ble Supreme Court in the case of CIT v. Reliance Petroproduct Pvt. Ltd. (2010) 322 ITR 174 (SC). He submitted that penalty cannot be imposed merely on the ground that the claim made by the assessee is rejected. He submitted that the Hon ble co-ordinate Bench in assessee s own case in ITA No.789 to 791Ahd/2007 dated 30-07-2010 has confirmed deletion of penalty as levied in respect of disallowing payment of royalty to the non-resident foreign collaborator of the assessee. He submitted in the light of various judicial pronouncements no fault can be found in the finding of Ld. CIT(A). 6. We have heard the rival submissions, perused the material available on record and the judgment cited by the parties. We find that Ld. CIT(A) has considered the submission of the came to the conclusion that the penalty levied by Assessing Officer in respect of disallowance of deduction u/s. 35AB of the Act cannot be sustained. The finding of Ld. CIT(A) in para 4.5 to 4.16. reads as under:- 4.5 I have considered the facts and submissions of the Ld. A.R carefully. It is seen that the A.O has levied the penalty in respect of the amount which has been finally confirmed by the Hon ble ITAT a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abricated. 4.10 Section 271(1)(c) of the Act provides hat if the Assessing Officer, in the course of the proceedings under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay byway of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reasons of the concealment of particulars of his income. Explanation 1 to section states that where in respect of an facts material to the computation of total income of any person under his Act, such person fails to offer an explanation or offers an explanation which is found by the AO false or such person offer 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 the total income have been disclosed by him, the, 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 particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim is a subjective exercise and whether a claim is accepted or rejected has nothing to do with furnishing of inaccurate particulars of income. The AO has apparently proceeded to treat appellant s claim for deduction of bad debt and prior period expenses as furnishing of inaccurate particulars. What is a correct claim and what is an incorrect claim is a matter of perception. It is a settled position of law that raising a legal claim, even if it is ultimately found to be legally unacceptable, cannot amount of furnishing of inaccurate part5iculars of income. Inaccurate as noted above, is something factually incorrect and interpretation of law can never be a factual aspect. Just because an Assessing Officer does not accept an interpretation, such an interpretation is not rendered incorrect. In any event, as noted above, the connotations of expression particulars of income do not extend to the issues of interpretation of law and as such making a claim, which is found to be unacceptable in law, cannot be treated as furnishing of inaccurate particulars of income. In this view of the matter, the case of the appellant cannot be said to be a case of furnishing of inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate Tribunal, that no penalty was leviable in view of the finding of the Tribunal that when the assessee has claimed deduction of an amount that was debatable it could not be said that the assessee had concealed any income or furnished inaccurate particulars for evasion of tax, and, in view of the findings of the Tribunal, no case was made our for interference. 4.15 Further, Ho ble ITAT Ahmedabad bench in the case of Gujarat Credit Corporation Lt. v/s ACIT 113 ITD 133 has held that it is trite law that concealment proceedings are penal in character and under the substantive provisions of section 271(1)(c) , it is for the department to prove that the assessee had concealed the particulars of his income or furnished inaccurate particulars thereof to bring the case of the assessee within the mischief of the main provisions of section 271(1)(c) . Mere rejection of assessee s claim would not be sufficient to hold that assessee to be guilty of concealment. If there is no evidence on record except the explanation of the assessee which explanation is either found to be false or is unacceptable, it does not follow that concealment has been established. It is by virtue of Explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dsticks for the purpose of imposing penalty u/s. 271(1)(c) of the Act are different than those applied for making or confirming the additions. It is, therefore, necessary to re-appreciated and reconsider the matter so as to find out as to whether the addition made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act and whether it is a fit case to impose the penalty by invoking the said provisions. The provisions of section 271(1)(c) of the Act stipulated that if the Assessing Officer or the CIT(Appeals) or the Commissioner in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof, he may direct that such person shall pay by way of penalty a sum which shall not be less than out which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to Section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore interpreting the aforementioned provisions clause of sub-section (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. By reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty, Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind. Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this court, inheres on the fact of the statutory provisions. Penalty proceedings are not be initiated, as has been statutory provisions. Penalty proceedings are not to be initiated as has been noticed by the Wanchoo Committee, only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. The term inaccurate particulars is not defined. Furnishing of an assessment of value of the property may not by itself be fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim will not amount to filing of inaccurate particulars of income. It can at best be a wrong claim not a false claim . N such circumstances, Hon be Delhi High Court held in the case of Commissioner of Income-tax vs. Bacardi Martini India Limited, 288 ITR 585 (Del) that no penalty was leviable. Recently, Hon ble Apex Court in CIT Vs. Reliance Petro Products, arising out of SLP (C) No.27161 of 2008, vide their order dated 17.3.2010 held that 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 as. Such claim made in the Return cannot amount to the inaccurate particulars, Hon ble Apex Court concluded. Thus, merely beaus eth assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract the penalty u/s. 271(1)(c) of the Act. In the present case, we are of the opinion that the disallowance of claim for deduction of royalty, by merely having recourse to provisions of sec. 40(a)(ia) of the Act cannot be considered as concealment of income or furnishing inaccurate particulars thereof. 5.3 The aforesaid view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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