2014 (7) TMI 556 - AT - Income Tax

Tribunal Upholds Penalty for Income Concealment & Ineligible Deduction Claim

SHR. Trading Pvt. Ltd. Versus DCIT 9(3), Mumbai

SHR. Trading Pvt. Ltd. Versus DCIT 9(3), Mumbai - TMI Issues Involved:1. Imposition of penalty under Section 271(1)(c) for concealment of income.2. Whether the assessee-company was entitled to claim deduction under Section 54 of the Income Tax Act.3. Applicability of the Supreme Court decision in CIT v. Reliance Petro Products Ltd. to the case.4. Determination of whether the claim made by the assessee was debatable or patently wrong.Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c) for Concealment of Income:The core issue revolves around the imposition of penalty under Section 271(1)(c) of the Income Tax Act for concealment of income by the assessee-company. The assessee had claimed a deduction under Section 54, which was not permissible for a corporate entity. The Assessing Officer (AO) found that the assessee had furnished inaccurate particulars of income by claiming an ineligible deduction, thereby concealing its income. The penalty of Rs. 41,00,754 was levied as a result.2. Entitlement to Claim Deduction under Section 54:The assessee-company, engaged in the business of letting out immovable property, sold a property and claimed a deduction under Section 54 of the Act. The AO and the First Appellate Authority (FAA) held that the deduction under Section 54 was only applicable to individuals or Hindu Undivided Families (HUFs), not to companies. The assessee's claim was deemed patently wrong and inadmissible, making it liable for penalty.3. Applicability of the Supreme Court Decision in CIT v. Reliance Petro Products Ltd.:The assessee argued that the penalty should be deleted based on the Supreme Court's decision in CIT v. Reliance Petro Products Ltd., where it was held that merely making a claim which is not sustainable in law does not amount to furnishing inaccurate particulars. However, the Tribunal distinguished this case by stating that the claim made by the assessee was not debatable but patently wrong. The Tribunal emphasized that there is a fundamental difference between a debatable claim and a blatantly inadmissible claim.4. Determination of Whether the Claim was Debatable or Patently Wrong:The Tribunal analyzed various judgments to differentiate between debatable claims and patently wrong claims. It concluded that the assessee's claim under Section 54 was a clear case of making an ineligible claim after due application of mind. The Tribunal cited several cases where courts have upheld penalties for making false or bogus claims, emphasizing that such claims are neither legally nor factually tenable. The Tribunal held that the assessee's claim was not a bona fide error but a deliberate attempt to evade tax, thus justifying the imposition of penalty.Conclusion:The Tribunal dismissed the appeal filed by the assessee, confirming the penalty imposed by the AO and FAA. It held that the assessee had furnished inaccurate particulars of income and concealed its income by claiming a deduction under Section 54, which was not permissible for a corporate entity. The Tribunal emphasized that making a patently wrong claim, as opposed to a debatable one, attracts penalty under Section 271(1)(c) of the Income Tax Act.