2024 (4) TMI 801 - AT - Income Tax

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 ... Levying penalty u/s. 271(1)(c) - as assessee has concealed the income by declaring the remuneration and interest on capital as gross receipts and declared the same u/s. 44AD and claimed to have been earned profit @ 8% - AO noted that the assessee ought to have declared the same as business income instead declared u/s. 44AD of the Act, which he did only to evade tax on interest and remuneration from the firm - AO noted that this issue was detected during assessment proceedings and he has not declared the income on his own but after detection it was declared and paid taxes HELD THAT:- Admittedly, the assessee has filed information in the return of income in regard to remuneration and interest on capitals received from the partnership firm - This fact is disclosed by assessee in its original return of income and original return of income was processed u/s. 143(1) of the Act but assessee claimed these two items i.e., remuneration received as a partnership firm and interest on capital receipt from partnership firm on presumptive basis u/s. 44AD of the Act and declared net profit @ 8%. We agree with the argument of ld. Senior DR that the assessee cannot make such claim and this is not allowable and this position has been clarified in the case of Anandkumar [2020 (12) TMI 994 - MADRAS HIGH COURT]. But, we noted that all the facts relating to these two claims made by assessee are available before the AO and even the AO processed the original return and accepted the claim, which may be wrong. We have gone through the decision of Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT] wherein the Hon’ble Supreme Court has propounded “the meaning of the term ‘particulars’ used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate ‘particulars’. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate ‘particulars’”. Mere fact that the claim of the assessee has been negated by the AO, it does not amount to concealment of income or furnishing of inaccurate particulars of income by the assessee. In the present case before us also, the assessee has disclosed complete particulars of income relating to remuneration received from firm and interest on capital invested with the firm. Once this is a fact, it means that there is no issue as regards to concealment of particulars of income. Thus in the present case, the particulars are declared by assessee in his return of income and the assessee has only claimed those items as business receipts instead of declaring it as profit on gross basis. Thus this is not a fit case levy of penalty u/s. 271(1)(c) of the Act. There is no concealment of particulars of income or new evidences found by the AO for making any kind of addition. Appeal filed by the assessee is allowed. 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.