TaxTMI 
TaxTMI 
2015 (5) TMI 424
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....1 (hereinafter referred to as the Act). The facts of the case in brief are that the assessee filed the return of income on 16.11.2007 declaring an income of Rs. 2,44,55,373/-. However, the assessment was framed by the AO u/s 143(3) of the Act on 24.12.2009 at an income of Rs. 2,76,91,030/-. The AO made the addition of Rs. 32,35,660/- and initiated the penalty proceedings u/s 271(1)(c) of the Act. The AO pointed out that the assessee had shown income from other sources at Rs. 42,276/-, however, on perusal of the TDS certificates attached with the return of income relating to TDS on payment of interest u/s 194A of the Act, it was noticed that the assessee had also received interest from various companies amounting to Rs. 55,30,390/-. The AO asked the assessee to explain the discrepancy. In response the assessee submitted that the interest received, had been netted against the interest paid and filed the details of reconciliation of interest paid and received. From the said details, the AO found that against the rental income of Rs. 4,09,99,503/-, the assessee had not only claimed interest on housing loan taken from the bank amounting to Rs. 79,16,523/- but the net interest outflow de....
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.... 37,80,200/- as against the claimed interest of Rs. 70,22,831/-. The AO also worked out the interest income from companies at Rs. 55,30,319/- and allowed the deduction u/s 57 of the Act for Rs. 37,87,200/-, the balance amounting to Rs. 17,43,119/- was held to be income from other sources and the deduction of Rs. 70,22,831/- claimed against income from House Property was disallowed in totality. Accordingly, impugned penalty u/s 271(1)(c) of the Act was levied. 5. The assessee in the penalty proceedings submitted to the AO that the complete details in respect of interest were furnished alongwith the return of income and that the interest received from different parties was subject to TDS. It was further stated that the complete details of interest paid were filed and net of interest had been claimed against income from House Property. It was further stated that the assessee had not concealed any income and nor furnished any particulars of income. Therefore, no penalty u/s 271(1)(c) of the Act was leviable. It was further stated that mere making of claim which was not sustainable in law by itself would not amount to furnishing of inaccurate particulars regarding income of the assesse....
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....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. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. Reading the words 'inaccurate' and 'particulars' in conjuction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous; In this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c). A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income....
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....iculars of income, therefore, penalty u/s 271(1)(c) of the Act was not leviable. It was further stated that the assessee claimed the netting of the interest, however the AO did not allow the claim and disallowed a part of interest, the assessee did not prefer any appeal, therefore on this basis that a claimed the assessee was not accepted, penalty u/s 271(1)(c) of the Act was not leviable. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd. 322 ITR 158. 9. It was further stated that for levying the penalty u/s 271(1)(c) of the Act, the AO was required to record the satisfaction that the assessee concealed the income or furnished inaccurate particulars of income. However, the AO nowhere in the assessment order dated 24.12.2009 stated that he was satisfied that the assessee concealed the income or furnished inaccurate particulars of income. The ld. Counsel for the assessee drew our attention towards page no. 5 of the assessment order and stated that the AO while making the addition of Rs. 32,35,660/-, simply stated that penalty for furnishing of inaccurate particulars of income is initiated, therefore, the penalty ....
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....nies and giving loans etc. The assessee also received interest amounting to Rs. 55,30,319/- from different companies. The AO limited the interest @ 9% on the loans advanced amounting to Rs. 4,20,80,000/- and worked out the interest of Rs. 37,87,200/- which was allowed as deduction u/s 57 of the Act against the interest income of Rs. 55,30,319/-. 12. From the above facts it is clear that the AO allowed the interest on estimate basis i.e. @ 9% amounting to Rs. 37,87,200/- as against the interest claimed at Rs. 70,22,831/-. In the present case, the assessee furnished all the particulars relating to the interest earned and paid but the claim of the assessee was not accepted in toto. Now question arises as to whether penalty u/s 271(1)(c) of the Act is leviable when the claim of the assessee is partly allowed. In this regard the Hon'ble Supreme Court in the case of CIT Vs Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (supra) held as under: "A glance at the provisions of section 271(1)(c) of the Incometax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished ....
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....d that the AO was satisfied that the assessee concealed the income. On a similar issue the Hon'ble Jurisdictional High Court in the case of Ms. Madhushree Gupta Vs Union of India and Another (2009) 317 ITR 107 held as under: "The legal position that power to impose penalty under section 271 of the Act depends upon the satisfaction of the Income-tax Officer in the course of the proceedings under the Act remains the case even after the insertion of section 271(1B). Prima facie satisfaction of the Assessing Officer as reflected in the record as against his "final conclusion" should be discernible clearly from the order passed during the course of such proceedings. The provision only provides that an order initiating penalty cannot be declared bad in law only because it states that penalty proceedings are initiated, if otherwise it is discernible from the record, that the Assessing Officer has arrived at prima facie satisfaction for initiation of penalty proceedings. The issue is of discernibility of the "satisfaction" arrived at by the Assessing Officer during the course of proceeding before him. Section 271(1)(c) has to be read in consonance with section 271(1B). The presence of pri....