ITAT rules no penalty under section 271(1)(c) for incorrect presumptive taxation claim when full disclosure made

ITAT Chennai held that penalty u/s 271(1)(c) cannot be levied where assessee disclosed remuneration and interest on capital from partnership firm in original return but incorrectly claimed presumptive taxation u/s 44AD at 8% profit instead of declaring as business income. Though the claim was legally incorrect and disallowed, complete particulars were disclosed in the return. Following Reliance Petroproducts SC precedent, making an incorrect claim does not constitute furnishing inaccurate particulars or concealment of income. Since no information was found incorrect or inaccurate and all facts were available to AO, penalty provision cannot be invoked. Appeal allowed.

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Issues involved:
The judgment deals with the issue of penalty imposition under section 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income and concealment of income.

Details of the Judgment:

1. Background and Assessment:
The appellant's appeal arose from the order of the Commissioner of Income-Tax (Appeals) regarding the penalty imposed under section 271(1)(c) of the Income Tax Act. The assessment was conducted for the assessment year 2016-17 under section 147 read with section 144B of the Act. The penalty was levied by the Income Tax Officer for concealing income related to remuneration and interest on capital received from a partnership firm.

2. Arguments and Facts:
The appellant, a partner in a firm, initially filed the return of income under section 44AD of the Act, declaring net profit at 8% of gross receipts. The Assessing Officer added the remuneration and interest on capital claimed as gross receipts, leading to a penalty initiation under section 271(1)(c). The appellant contended that all relevant particulars were disclosed in the original return and revised the statement of income before the assessment was concluded.

3. Legal Standpoints:
The Counsel for the appellant argued that since all details were available to the Assessing Officer, there was no concealment of income or furnishing of inaccurate particulars. The Senior DR, however, asserted that the appellant intentionally concealed income to evade tax. The Tribunal considered the precedent set by the Hon'ble Supreme Court and the Madhya Pradesh High Court in similar cases.

4. Tribunal's Decision:
The Tribunal noted that the appellant disclosed all facts regarding the remuneration and interest received from the firm in the original return. Despite the incorrect claim under section 44AD, the Tribunal held that there was no concealment of particulars of income. Citing the Supreme Court's ruling, the Tribunal concluded that making an incorrect claim does not amount to furnishing inaccurate particulars. Therefore, the penalty under section 271(1)(c) was deleted, and the appeal was allowed.

5. Conclusion:
The Tribunal ruled in favor of the appellant, emphasizing that the particulars were declared in the return of income, and there was no concealment or new evidence found by the Assessing Officer. The penalty was deleted, aligning with the legal principles established by the Supreme Court and High Courts in similar cases.

This judgment highlights the importance of disclosing all relevant facts and the distinction between incorrect claims and intentional concealment of income under the Income Tax Act.

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