Penalty under Income Tax Act Section 271(1)(c) set aside by ITAT for inaccurate particulars

The ITAT set aside the penalty imposed by the AO under section 271(1)(c) of the Income Tax Act, ruling that the assessee's actions did not amount to furnishing inaccurate particulars of income. The appeal was allowed, and the penalty was directed to be deleted.

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Issues:

1. Penalty under section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.

Analysis:

The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the levy of a penalty under section 271(1)(c) of the Income Tax Act. The assessee, a company engaged in pharmaceutical manufacturing and trading, had filed its return of income for the assessment year 2009-10, disclosing total income. The Assessing Officer (AO) disallowed certain expenses related to exempt income of dividends, not in accordance with Rule 8D. The AO added an amount to the total income, initiating penalty proceedings under section 271(1)(c). The penalty was imposed on the grounds of inaccurate particulars of income furnished by the assessee.

During the penalty proceedings, the AO concluded that the assessee failed to compute the disallowance under Rule 8D accurately, constituting inaccurate particulars of income. The assessee argued that it had made a suo moto disallowance and followed a specific approach in disallowing expenses under Rule 8D. The assessee contended that the penalty was not justified as it had acted in good faith and followed a reasonable interpretation of the law. The assessee cited legal precedents and the decision of the Hon'ble Supreme Court in support of its arguments.

The Departmental Representative opposed the assessee's contentions, alleging that inaccurate particulars were furnished to evade tax payment. After considering the arguments and evidence, the ITAT noted discrepancies in the AO's and assessee's approaches to disallowances under Rule 8D. The ITAT found merit in the assessee's arguments, supported by legal decisions, emphasizing that even if the assessee's claim was incorrect, it did not amount to furnishing inaccurate particulars or concealment of income. The ITAT referred to a previous ITAT decision and the Supreme Court's ruling to support its conclusion.

Ultimately, the ITAT set aside the penalty imposed by the AO, directing its deletion. The ITAT found that the assessee's actions did not warrant the penalty under section 271(1)(c) of the Income Tax Act. The appeal of the assessee was allowed, and the order was pronounced in the open court on November 4, 2015.

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