Penalty under Section 271(1)(c) for incorrect expense claim rejected; incorrect claim not treated as inaccurate particulars

The dispute addresses imposition of penalty for furnishing inaccurate particulars of income where an assessing officer disallowed interest expense as capital in nature and treated it as revenue expenditure. The tribunal relied on the principle that making an incorrect claim is distinct from furnishing inaccurate particulars and cited precedent to that effect; consequence: the penalty under the relevant provision was not sustainable and the challenge to the penalty was allowed. The tribunal noted the matter on capitalization had attained finality and that the assessee capitalised interest in subsequent years, supporting the view that no inaccurate particulars were furnished.

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Issues: Whether penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be levied where the assessee claimed interest as revenue expenditure (disallowed by assessing officer as capitalizable under Section 36(1)(iii)) and whether such incorrect claim constitutes furnishing inaccurate particulars of income.

Analysis: The factual record shows details of purchase dates, loan dates and dates of assets being put to use were furnished during assessment proceedings. The legal principle applied is that an incorrect or disputed claim made in the return, disclosed in the accounts and supported by a bona fide contention on classification (revenue v. capital), does not ipso facto amount to furnishing inaccurate particulars of income or concealment attracting penalty under Section 271(1)(c). Authorities and precedent establishing that mere non-acceptance of a claim by revenue is insufficient to invoke penalty were applied to the facts, and the assessing officer's confirmation of the addition attained finality on quantum.

Conclusion: Penalty under Section 271(1)(c) is not sustainable; the levy is deleted and the appeal is allowed in favour of the assessee.

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