2012 (9) TMI 589 - HC - Income Tax

Court rules correction of status disclosure in tax return not deliberate concealment; penalty unjustified

The High Court upheld the decision of the CIT (A) and ITAT, ruling that the assessee's correction of status disclosure in the return, promptly after ... Penalty u/s 271 (1) (C) - wrong description of the status of the assessee - CIT (A) deleted the levy - Held that:- Wrong description of the status of the assessee, which was corrected immediately by filing revised return, and in which the loss was reduced on account of a notification issued by the Ministry of Awas and Town Planning, could not be treated as furnishing inaccurate particulars to attract the penalty clause under Section 271 (1) (c) - The mistake was immediately accepted and did not result into any loss to the revenue. We may also observe here that when the Assessing Authority was fully aware that Hapur Pilkhuwa Development Authority, constituted under the U.P. Urban Planning and Development Act, 1973 is a local authority, a mere wrong description of the status should not have been a ground to award penalty. No error in the findings of CIT (A) and ITAT that there was no declaration of inaccurate particulars. Even if the mens rea may not be necessary, in attracting the penalty, the ratio of the judgment of the Supreme Court in CIT v. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein it is held that A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee supports the conclusions of the CIT (A) and ITAT that in this case the penalty under Section 271 (1) (c) of the Act was not attracted - in favour of assessee. Issues:Income Tax Appeal under Section 260-A for assessment year 2003-04, involving penalty under Section 271 (1) (c) for disclosing inaccurate particulars of income.Analysis:1. The case involved an appeal regarding the imposition of a penalty under Section 271 (1) (c) of the Income Tax Act, 1961, for disclosing inaccurate particulars of income. The primary issue was whether the assessee deliberately concealed income details by claiming the wrong status and revising the return after detection by the Department.2. The Assessing Officer (AO) imposed a penalty of Rs. 12,10,000 under Section 271 (1) (c) after finding that the assessee, a local authority, had wrongly disclosed its status as an Artificial Juristic Person (AJP) to claim losses not due to it. The CIT (A) allowed the appeal, noting that the mistake in status disclosure was corrected in a revised return filed promptly after being pointed out by the AO.3. The Income Tax Appellate Tribunal (ITAT) considered that the revised return correction was due to a Ministry notification regarding infrastructure fund utilization, not malafide intentions. The ITAT found no evidence supporting the revenue's claim of inaccurate particulars disclosure to evade tax.4. The High Court, following precedents like CIT v. Reliance Petroproducts Pvt. Ltd., emphasized that the mere incorrect claim, promptly corrected, did not amount to furnishing inaccurate particulars under Section 271 (1) (c). The Court upheld the CIT (A) and ITAT findings that no inaccurate particulars were declared, supporting the non-applicability of the penalty.5. The Court concluded that the immediate correction of the status description, which did not result in revenue loss, did not warrant a penalty under Section 271 (1) (c). The AO's imposition of penalty on a non-existing ground was deemed unjustified, leading to the dismissal of the Income Tax Appeal for lack of substantial legal questions.This detailed analysis highlights the key legal arguments and findings of the judgment, focusing on the interpretation and application of relevant provisions of the Income Tax Act in the context of the penalty for disclosing inaccurate particulars of income.