2022 (12) TMI 304 - AT - Income Tax

Penalty deleted under Section 271(1)(c) as no deliberate misrepresentation found. Appeal dismissed.

DCIT, Circle-13 (1) New Delhi Versus Jagson International Ltd.

The Tribunal upheld the decision to delete the penalty under section 271(1)(c) as there was no deliberate misrepresentation of facts by the assessee. The ... Penalty u/s 271(1)(c) - assessee company has furnished inaccurate particulars of income while furnishing Income Tax Return for the year under consideration - disallowance under section 14A, disallowance on account of provision for gratuity,difference in interest as per Form 26AS and addition on account of short term capital gain - HELD THAT:- The word “particulars” used in section 271(1)(c) would embrace the meaning of the details of the claim made. The Hon’ble Supreme Court Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] further observed that the word “inaccurate” has been defined in Webster’s Dictionary as “not accurate, no exact or correct; not according to truth etc.”. Reading the word “inaccurate” in conjunction with “particulars” would mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. Hon’ble Supreme Court went on to observe further that merely because the assessee had claimed the expenditure which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) of the Act. In Pr. CIT vs. Sesa Goa Ltd. [2021 (8) TMI 227 - BOMBAY HIGH COURT], The Hon’ble Bombay High Court held that an erroneous claim simplicitor does not automatically attract penalty and it is only when an erroneous claim is based on a deliberate misrepresentation of facts or deliberate suppression of relevant material facts that penalty is imposed after deduction is denied. In the backdrop of the principles of law as set out in the above precedent, it would be obvious that on facts none of the disallowance / addition justifies levy of penalty u/s 271(1)(c) for furnishing inaccurate particulars of its income. It is not in dispute that Tonnage Tax Scheme applies to the assessee as held by the Hon’ble Delhi High Court in assessee’s case [2012 (11) TMI 594 - DELHI HIGH COURT] pertaining to preceding years which has been followed by the Tribunal for AY 2013-14 as well. If that be so any disallowance u/s 14A would automatically be allowable while computing income under the Tonnage Tax Scheme. Moreover, since all details have been disclosed and no inaccuracy has been pointed out by the Revenue, it cannot be said that any inaccurate particular has been furnished by the assessee. Disallowance on account of provision of gratuity - CIT(A) has followed the decision of his predecessor for AY 2012-13 wherein it is observed that the claim per say may be incorrect but in view of tax audit report accompanying the Return, it cannot be said that the assessee has furnished inaccurate particulars inviting levy of penalty u/s 271(1)(c) - Facts remaining the same for AY 2013-14, penalty for furnishing inaccurate particulars is not warranted as the contention of the AR that the department has accepted the decision of the CIT(A) in the preceding year deleting the penalty has not been controverted before us. Addition of difference between interest declared in books and shown in Form 26AS - Explanation of the assessee may not be convincing but the facts remain that the amount of deposits have duly been reflected in assessee’s books of account and a bonafide mistake on the part of the accountant not to tally the interest calculation with Form 26AS cannot lead to the conclusion that the assessee furnished inaccurate particulars of its income so as to justify levy of penalty under section 271(1)(c) of the Act. Declaration of long term capital gain instead of short term capital gain has been accepted by the Ld. CIT(A) due to error - As held in the case of Sesa Goa Ltd. [2021 (8) TMI 227 - BOMBAY HIGH COURT] an erroneous claim simplicitor does not automatically attract penalty unless there is deliberate misrepresentation of facts which has not been found in the case of the assessee and the error was rectified during assessment proceedings itself. CIT(A) has finally recorded a finding of fact that on the facts and in the circumstances of the case and in law, the impugned penalty is not imposable. We are inclined to concur with his findings. Accordingly, the appeal of the Revenue is rejected. Issues Involved:1. Deletion of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.2. Disallowance under section 14A.3. Disallowance on account of provision for gratuity.4. Addition due to difference in interest as per Form 26AS.5. Addition due to declaring short term capital gain as long term capital gain.Detailed Analysis:Issue 1: Deletion of Penalty under Section 271(1)(c) for Furnishing Inaccurate Particulars of IncomeThe appeal by the Revenue challenges the deletion of the penalty of Rs. 55,58,014/- imposed under section 271(1)(c) of the Income Tax Act, 1961, on the grounds of furnishing inaccurate particulars of income. The Ld. CIT(A) concluded that the penalty was not imposable as the assessee did not conceal any particulars or furnish inaccurate details. The Tribunal upheld this view, stating that mere disallowance or erroneous claims do not automatically result in penalty unless there is a deliberate misrepresentation of facts.Issue 2: Disallowance under Section 14AThe assessee argued that the disallowance under section 14A was tax neutral due to the Tonnage Tax Scheme, which exempts certain income from tax. The Ld. CIT(A) and the Tribunal noted that the Hon'ble Delhi High Court had upheld that the income from shipping business under the Tonnage Tax Scheme is exempt. Therefore, any disallowance under section 14A would not affect the taxable income, and no inaccurate particulars were furnished. The Tribunal concurred with the Ld. CIT(A)'s finding that the disallowance under section 14A was not warranted.Issue 3: Disallowance on Account of Provision for GratuityThe Ld. CIT(A) observed that the provision for gratuity was mentioned in the tax audit report, and there was no concealment of facts. The penalty for this disallowance was deleted for AY 2012-13, and the Revenue did not appeal against that decision. The Tribunal agreed that the claim, although incorrect, did not constitute furnishing inaccurate particulars since it was disclosed in the audit report.Issue 4: Addition Due to Difference in Interest as per Form 26ASThe difference in interest was attributed to different accounting methods used by the bank and the assessee. The Tribunal found that the deposits were correctly reflected in the books, and the discrepancy was a bona fide mistake by the accountant. Therefore, it did not amount to furnishing inaccurate particulars of income.Issue 5: Addition Due to Declaring Short Term Capital Gain as Long Term Capital GainThe error in declaring short term capital gain as long term capital gain was acknowledged and corrected during the assessment proceedings. The Tribunal noted that an erroneous claim does not attract penalty unless there is deliberate misrepresentation, which was not the case here.ConclusionThe Tribunal upheld the Ld. CIT(A)'s decision to delete the penalty under section 271(1)(c), agreeing that there was no concealment or furnishing of inaccurate particulars by the assessee. The appeal by the Revenue was dismissed, and the order pronounced in the open court on 6th December, 2022.