2022 (8) TMI 452 - AT - Income Tax

Appeal granted: Penalty under Income Tax Act for incorrect claim deleted.

M/s. The Tamilnadu Circle Postal Cooperative Bank Ltd. Versus The Assistant Commissioner of Income Tax, Non Corporate Circle 12 (1), Chennai

The Tribunal allowed the appeal filed by the Co-operative Bank, setting aside the penalty levied under section 271(1)(c) of the Income Tax Act for the ... Levy of penalty u/s 271(1)(c) - claim of deduction u/s 36(1)(viia) is not in accordance with the provisions of the Act and not found to be correct - HELD THAT:- Respectfully following the judgement of the Hon’ble Supreme Court in RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT]wherein, it was held that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars and the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Cholamandalam Investment & Finance Co. Ltd. [2014 (3) TMI 774 - MADRAS HIGH COURT] wherein, it was held that mere making of a claim, which is not sustainable in law, by itself, would not amount to furnishing of inaccurate particulars regarding the income of the assessee and that such a claim made in the return cannot amount to furnishing inaccurate particulars, we set aside the orders of authorities below and delete the penalty levied under section 271(1)(c) of the Act. - Decided in favour of assessee. Issues:Challenge to levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09 based on disallowance of deduction under section 36(1)(viia) of the Act.Analysis:Issue 1: Disallowance of Deduction under Section 36(1)(viia)The appellant, a Co-operative Bank, filed its return of income for the assessment year 2008-09, admitting an income of Rs. 2,48,81,820. The Assessing Officer disallowed the claimed deduction of Rs. 20,17,446 under section 36(1)(viia) of the Act, as it was not in accordance with the provisions of the Act. The disallowance was confirmed by the ld. CIT(A), leading to the initiation of penalty proceedings under section 271(1)(c) of the Act. The Assessing Officer levied a penalty of Rs. 6,11,292, which was also confirmed by the ld. CIT(A).Issue 2: Challenge to Penalty LeviedThe appellant contended that the findings in the assessment proceedings were not conclusive evidence for levying the penalty. It was argued that an incorrect claim does not amount to furnishing inaccurate particulars or concealment of income, citing the decision in CIT v. Reliance Petroproducts Pvt. Ltd. The appellant sought deletion of the penalty under section 271(1)(c) of the Act.Issue 3: Judicial Analysis and DecisionUpon review, the Tribunal observed that the mere making of an unsustainable claim in law does not constitute furnishing inaccurate particulars of income. Citing the decision in CIT v. Reliance Petroproducts Pvt. Ltd., the Tribunal emphasized the necessity for contumacious conduct on the part of the assessee to warrant a penalty under section 271(1)(c) of the Act. The Tribunal highlighted that the penalty provision cannot be invoked unless there is a strict violation of the law. Relying on legal precedents, the Tribunal concluded that the incorrect claim made by the appellant did not amount to furnishing inaccurate particulars and, therefore, set aside the penalty levied under section 271(1)(c) of the Act.In conclusion, the Tribunal allowed the appeal filed by the assessee and deleted the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09.