Penalty for Incorrect Claim Disallowed: ITAT Upholds Decision (1)(c)

The ITAT upheld the CIT(A)'s decision to delete penalties imposed under section 271(1)(c) for disallowance of deductions claimed under section 80IB. The ITAT ruled that the late filing of returns did not constitute furnishing inaccurate particulars of income as the claim was made in good faith. The appeals by the Revenue were dismissed, affirming that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income.

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Issues Involved:
1. Penalty u/s 271(1)(c) for disallowance of deduction claimed u/s 80IB.
2. Interpretation of Section 80AC and its application to the case.
3. Whether the claim of deduction u/s 80IB despite late filing of return constitutes furnishing inaccurate particulars of income.

Summary:

Issue 1: Penalty u/s 271(1)(c) for disallowance of deduction claimed u/s 80IB
The Revenue filed appeals against the orders of the Commissioner of Income-tax (Appeals) which deleted the penalties imposed u/s 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer had imposed penalties on the assessee for furnishing inaccurate particulars of income by claiming deductions u/s 80IB, which were disallowed due to late filing of returns.

Issue 2: Interpretation of Section 80AC and its application to the case
The Assessing Officer disallowed the deductions claimed u/s 80IB for the assessment years 2006-07 and 2007-08 because the returns were filed beyond the due date specified u/s 139(1), as required by Section 80AC. The assessee could not justify the delay in filing the returns.

Issue 3: Whether the claim of deduction u/s 80IB despite late filing of return constitutes furnishing inaccurate particulars of income
The CIT(A) and ITAT held that merely making a claim which is not admissible does not attract penalty u/s 271(1)(c). The assessee had disclosed all relevant particulars and the claim was made under a bona fide belief. The penalty provisions cannot be invoked merely because the claim was ultimately found to be legally unacceptable. The ITAT cited the Supreme Court's decision in CIT Vs. Reliance Petro Products Pvt. Ltd. (322 ITR 158) which held that making an incorrect claim in law does not amount to furnishing inaccurate particulars of income.

Conclusion:
The ITAT upheld the CIT(A)'s order deleting the penalties, stating that the assessee had not furnished inaccurate particulars of income and the claim was made under a bona fide belief. The appeals filed by the Revenue were dismissed.

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