2012 (7) TMI 338

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....as disclosed income of Rs. 7,18,825/- in the return filed for the A.Y. 2001-02. However, an addition of Rs.13,17,241/- was made by treating the interest income on short term deposits as 'income from other sources'. Apparently, the assessee had disclosed the income as 'income from business'. 3. In appellate proceedings, Ld. CIT(A) allowed the assessee's claim that the interest income of Rs. 13,17,241/- was not to be taxed as income from other sources. However, ITAT vide its order in ITA No. 1378/Del/2005 dated 25.3.2008 reversed the order of the Ld. CIT(A) and upheld the AO's view that interest of Rs. 13,17,241/- earned from fixed deposits is liable to be assessed as income from other sources. Subsequent to the receipt of the ITAT order, ....

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....TR 475(Del). It is thus, apparent that the issue in dispute which has been held to be in the nature of concealment of income by the AO is a debatable issue as the Hon'ble courts have ruled both in favour and against on the issue. At the time of filing of the return on 31.10.01, the decision of the jurisdictional High court in the case of CIT Vs. Sriram Honda Power Equipment 289 ITR 475(Del) had not been delivered. Hence, at the time of filing of the return for A.Y. 2001-02 the appellant's claim was duly supported by the past history on this issue. 9. Moreover as stated by the appellant in the statement of facts the entire particulars of the interest income stood disclosed in the return filed. Thus the variance in the returned and assesse....

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....on of the Legislature to make punishable such claims, if they were not accepted." 10.3 On further appeal by revenue the Hon'ble Rajasthan High Court held as under: "Held affirming the decision of the Appellate Tribunal, that no penalty was leviable in view of the finding of the Tribunal that when the assessee had claimed deduction of an amount that was debatable it could not be said that the assessee had concealed any income or furnished inaccurate particulars for evasion of tax, and in view of the finding of the Tribunal no case was made out for interference." 10.4 The Hon'ble Supreme Court in case of CIT VS. Reliance Petroproducts P. Ltd. 322 ITR 158 has held that penalty u/s 271(1)(c) will not lie merely if an incorrect! inadmis....

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....erned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars." 11. In the case under consideration it stands established that the issue resulting in the determination of higher income u/s 143(3) was clearly debatable. Respectfully following the ratio of the above judgments which have held that penalty is not imposable on debatable issues or claims/deductions disallowed on account of varying legal interpretations it is held that penalty u/s 271(1)(c) is not imposable in the present case. Accordingl....