2021 (8) TMI 227 - HC - Income Tax

Court Upholds Assessee's Appeal, Emphasizes Need for Factual Accuracy in Tax Claims

The Court dismissed the appeal in favor of the Assessee, emphasizing the absence of legal grounds for imposing a penalty as the deduction claimed in the ... Penalty u/s 271C - whether the respondent-assessee had made an incorrect claim for deduction in its E-Return filed on 29/9/2009? - HELD THAT:- This Court has dismissed the Revenue's appeal against the order dated 8/3/2013 [2013 (9) TMI 233 - ITAT PANAJI] it is quite clear that there was no error on the part of the respondent-assessee in claiming the deduction in its E-Return. Since there was no error, there was obviously, no question of imposing any penalty upon the respondent-assessee. Even, otherwise, an erroneous claim simpliciter does not automatically attract a penalty. It is only when an erroneous claim is based on a deliberate misrepresentation of facts or deliberate suppression of relevant material facts, that, a penalty is imposed after the deduction is denied. In this case, the deduction was ultimately allowed and, therefore, there was no question of levy of any penalty. Issues:1. Correct case number in substantial question of law.2. Justification of relying on the order to dismiss the appeal.3. Claim for deduction in E-Return.4. Levy of penalty under section 271C of the Income Tax Act.5. Appeal against the order of the Commissioner of Income Tax (Appeals).6. Appeal against the order of the Income Tax Appellate Tribunal (ITAT).7. Error in claiming deduction in E-Return.8. Imposition of penalty on erroneous claim.Analysis:Issue 1: Correct case number in substantial question of lawThe correct case number was disputed by the parties, leading to the re-framing of the substantial question of law to ensure clarity and accuracy in addressing the matter.Issue 2: Justification of relying on the order to dismiss the appealThe Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal based on its order dated 8/3/2013 in ITA No.72/PNJ/2012, emphasizing that there was no error in claiming the deduction in the E-Return. The Tribunal held that the levy of penalty was not justified as there was no legal or factual error in the deduction claimed.Issue 3: Claim for deduction in E-ReturnThe respondent-assessee filed an E-Return for the assessment year 2009-2010, declaring a total income and claiming a deduction under section 10-B of the Income Tax Act. The correctness of this claim was a key issue in the appeal.Issue 4: Levy of penalty under section 271C of the Income Tax ActThe Assessing Officer (A.O) imposed a penalty under section 271C on the respondent-assessee for making an incorrect claim of deduction in the E-Return. This penalty was later deleted by the Commissioner of Income Tax (Appeals).Issue 5: Appeal against the order of the Commissioner of Income Tax (Appeals)The appellant-revenue appealed the order of the Commissioner of Income Tax (Appeals) which deleted the penalty imposed by the A.O. This led to the subsequent appeal before the ITAT.Issue 6: Appeal against the order of the Income Tax Appellate Tribunal (ITAT)The present appeal was based on the order of the ITAT dated 8/3/2013, where the Tribunal upheld the deletion of the penalty by the Commissioner of Income Tax (Appeals), leading to the challenge by the appellant-revenue.Issue 7: Error in claiming deduction in E-ReturnThe ITAT found no error in the respondent-assessee's claim for deduction under section 10-B of the IT Act. The Tribunal directed the Assessing Officer to recompute the exemption available based on the market value of certain inputs.Issue 8: Imposition of penalty on erroneous claimThe judgment clarified that an erroneous claim alone does not warrant a penalty unless it involves deliberate misrepresentation or suppression of material facts. Since the deduction was ultimately allowed, there was no basis for imposing a penalty.In conclusion, the Court dismissed the appeal in favor of the Assessee, highlighting the absence of any legal basis for imposing a penalty due to the correctness of the deduction claimed in the E-Return. The judgment emphasized the importance of deliberate misrepresentation or suppression of facts for penalty imposition and upheld the decisions of the Commissioner of Income Tax (Appeals) and the ITAT.