Penalty for Furnishing Inaccurate Income Particulars upheld unless bona fide belief or disclosure negates the inaccuracy.

The article addresses imposition of penalty under the Income tax Act for claiming and carrying forward losses not allowable under the Act, focusing on whether technical or system errors and asserted absence of mala fide intent can defeat penalty under the provision for furnishing inaccurate particulars. It explains that where brought forward losses are legally disallowable and their claim amounts to inaccurate particulars, penalty is sustainable unless the assessee establishes a bona fide belief or adequate disclosure that negates inaccuracy or bad faith; mens rea is not a statutory requirement but bona fide belief may avoid penalty.

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Issues: (i) Whether the penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 for claiming and carrying forward losses not allowable under the Act can be sustained where the assessee claimed such losses allegedly due to technical/system reasons and asserted absence of mala fide intention.

Analysis: The issue involves application of Section 271(1)(c) of the Income-tax Act, 1961 for furnishing inaccurate particulars of income by claiming carried forward losses that the Assessing Officer held were not allowable under the statutory provisions governing carry forward and set off (including Sections 72, 73, 73A and Section 80IA; the timing of return filing under Section 139(4) and assessment under Section 143(3) and revision under Section 263 are relevant factual and legal context). The appellate authority examined whether the claim of loss was made with bona fide belief or was false/mala fide, having regard to the department's processing/system mechanics relied upon by the assessee and the jurisprudence that mens rea is not a statutory requirement but bona fide belief and disclosure may negativate penalty in appropriate cases. The Tribunal reviewed the Assessing Officer's finding that the claimed brought forward losses were not allowable under the Act and thus amounted to furnishing inaccurate particulars, and concluded that the misclaim was not bona fide or otherwise defensible on the facts before it.

Conclusion: The penalty imposed under Section 271(1)(c) of the Income-tax Act, 1961 for furnishing inaccurate particulars of income in respect of wrongly claimed brought forward losses is sustained; the appellate order deleting the penalty is set aside and the Assessing Officer's penalty order is restored in favour of the Revenue.

Ratio Decidendi: Where an assessee claims brought forward losses that are not allowable under the Income-tax Act and such claim constitutes furnishing of inaccurate particulars of income, penalty under Section 271(1)(c) is sustainable notwithstanding assertions of technical/systemic error, unless a bona fide belief or disclosure is established that negates the inaccuracy or mala fide character of the claim.

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