High Court upholds assessee's position on penalty under Income-tax Act.

The High Court dismissed Revenue's petition for a reference to the High Court regarding the cancellation of a penalty under section 271(1)(c) of the Income-tax Act imposed on the assessee for inaccurate particulars of income/loss. The Court upheld the Tribunal's decision, emphasizing that the assessee had correctly disclosed the interest amount in its return and contesting the bank's suit did not constitute inaccurate particulars. The Court found no concealment of income by the assessee and concluded that the proposed question was not a legal issue but a matter of fact based on the disclosure in the return and the legal dispute with the bank.

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Issues:
Revenue's request for a reference to the High Court regarding the correctness of the Tribunal's decision in canceling a penalty under section 271(1)(c) of the Income-tax Act for inaccurate particulars of income/loss by the assessee.

Analysis:
The Revenue sought a direction to the Income-tax Appellate Tribunal to refer a question regarding the correctness of confirming the cancellation of a penalty under section 271(1)(c) of the Income-tax Act for filing inaccurate particulars of income/loss by the assessee. The assessee had declared a loss representing interest payable to a bank in its income tax return. The Assessing Officer found that the assessee had denied liability towards the bank in another legal matter and concluded that the assessee furnished inaccurate particulars of income by claiming the interest as a loss. A penalty was imposed, which was later canceled by the Commissioner (Appeals) and upheld by the Appellate Tribunal.

The Commissioner (Appeals) and the Appellate Tribunal both held that the assessee had correctly disclosed the interest amount in its return, and contesting the bank's suit did not amount to furnishing inaccurate particulars of income. The High Court noted that the assessee had clearly stated the business loss was due to interest on the bank loan in its return. Contesting the bank's suit on various grounds, including the plea of limitation, did not constitute inaccurate particulars. The High Court found no other material brought by the Assessing Officer to show concealment of income by the assessee. The Tribunal's decision was based on a concurrent finding of fact by the appellate authorities.

The High Court dismissed the Revenue's petition, stating that the proposed question was not a legal issue fit for reference. The High Court found no infirmity in the Tribunal's decision to decline the reference, as the act of the assessee in making the claim did not warrant a penalty under section 271(1)(c) of the Act. The judgment emphasized that the question proposed was not a legal one but a matter of fact based on the assessee's disclosure in the return and the ongoing legal dispute with the bank.

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