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TMI Blog2022 (9) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act amounting to Rs. 53,48,539/- ." 3. The Ld. DR has been heard. None appeared on behalf of the assessee. 4. Briefly stated, the assessee is a public sector sick industrial undertaking. For AY 2014-15, the assessee filed its return on 29.11.2014 declaring loss of Rs. 89,65,48,539/-. During the course of assessment proceedings, the assessee filed a revised computation of income reducing its total loss which was not accepted by the Ld. Assessing Officer ("AO"). The Ld. AO completed the assessment on 30.11.2016 on total loss of Rs. 86,69,45,090/- thereby making disallowance of Rs. 2,96,03,452/-. He initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 ("Act"). On appeal the Ld. CIT(A) confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow well settled that a mere making of the claim which is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee. 7. The Ld. CIT(A) deleted the impugned penalty observing in para 5 as under :- "5.1 In the aforesaid appeal is against the penalty order u/s 271 (1)(c) of the Act. The basic facts of the case indicate that the Indian Drugs & Pharmaceuticals Ltd. Co. is a wholly owned Public Sector undertaking of Govt. of India and in the Business of manufacturing of life saving medicines. The company is a sick Industrial undertaking and was under BIFR. The company incurred heavy losses, the BIFR had declared IDPL as sick units and they had also passed an order for winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is only due to the facts that the company was in liquidation, audited accounts could not be finalized before filing of the return. As a result, income was filed on an estimated basis by the appellant. Subsequently, the accounts were audited and a revised computation was filed. 5.4 The Assessing Officer in his penalty order has stated in para 6 as under:- "6. Further, at the time of filing of return of income, the assessee was required to furnish correct particulars of its income. Income Tax Act requires the assessee to furnish true & correct figure of its income as per law in force. Deduction which is not allowable in the eyes of law and still claimed as expenditure is clearly a form of tax evasion and falls under the term ''furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Assessment Years under consideration makes it clear that the scheme of sec. 271 (l)(c) visualizes imposition of penalty when the assessee has concealed income or when the assessee has furnished inaccurate particulars of income. In addition to these two situations, penalty can also be imposed, inter alia, when assessee is deemed to have concealed particulars of income under Explanation l to sec. 271 (1 )(c). A deeming fiction under Explanation 1 to sec. 271(l)(c) envisages two situations - (a) first, where in respect of any facts material to the computation of total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the AO or the CIT(A); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars have been furnished. Thus, the penalty under sec. 271(l)(c) is a penalty for concealment of income or for furnishing of inaccurate particulars, or, under the extended definition by the virtue of Explanation. 1 to sec. 271(l)(c), for a deemed concealment of income. 5.6 The judicial precedent also in this regard states that claim by the assessee which is not admissible would not make him liable to penalty u/s 271 (l)(c). The principle case of the Supreme Court in Reliance Petroproducts is quoted here under: S. 271 (1) (c) penalty cannot be imposed even for making unsustainable claims. The assessee claimed deduction u/s 26 (1) (iii) for interest paid on loan taken for purchase of shares. The AO disallowed the interest u/s 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee will invite penalty u/s 27I(l)(c). That is clearly not the intendment of the Legislature. (iii) The law laid down in Dilip Shroff 291 ITR 519 (SC) as to the meanings of the words "conceal" and "inaccurate" continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 (SC) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u/s 271(l)(c). " 5.7 The judgment of Reliance Petroproducts clearly shows the rejection of claim would not result in penalty consequences to the appellant. The penalty is therefore not sustainable and is deleted." 8. We concur with the findings and observations of the Ld. CIT(A). There is no substance in the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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