Article Details

Section 271(1)(c) provides that penalty can be only imposed if the authority was satisfied that any person had concealed particulars of his income or furnished inaccurate particulars of such income

COMMISSIONER OF INCOME TAX vs.DALIMA DYECHEM INDUSTRIES LTD.

HIGH COURT OF BOMBAY

- Penalty u/s 271(1)(c)—Levy of—Assessee had shown borrowed funds and interest free advances to it's sister concerns in it's accounts

—AO disallowed the proportionate interest out of the interest paid for the interest free advances given to the sister concern

—CIT(A) upheld the same—

ITAT set aside the orders and restored the matter to the file of AO for reexamination of the deductibility

—Upon remand, AO again disallowed the proportionate interest holding that the assessee had borrowed funds of which interest liability had been incurred

—AO also levied penalty holding that the assessee concealed it's income by furnishing inaccurate particulars

—Assessee challenged the levy of penalty on the ground that they had no malafide intention to evade any tax and all the facts and details were placed on record

—Commissioner allowed the appeal on grounds that merely because the claim made by an assessee was disallowed, penalty cannot be levied, unless it was demonstrated that the assessee had any malafide intention

—Tribunal accepted the reasoning of the Commissioner that the penalty cannot be levied merely because the claim of the assessee was found to be incorrect

—Held, Section 271(1)(c) provides that penalty can be only imposed if the authority was satisfied that any person had concealed particulars of his income or furnished inaccurate particulars of such income

—Thus in order to be covered by this provision there has to be concealment and that the assessee must have furnished inaccurate particulars

—An incorrect claim in law, would amount to furnishing inaccurate particulars

—No notice was issued to the assessee before imposing the penalty and this ground was taken by them in the appeal

—Both the assessee and it's sister concerns, were loss making units and the assessee bonafide felt that they were covered by the decision of the Apex Court in the case of S.A Developers

—Assessee had contested the issue upto the Tribunal and had also succeeded in as much as the matter was remanded back to AO and that no penalty could be levied as the actions of the assessee were bonafide

—Also, AO while imposing penalty had not rendered a conclusive finding that there was an active concealment or deliberate furnishing of inaccurate particulars—No perversity with the decision of the Commissioner (Appeals) and the Tribunal in deleting the penalty

—Revenue’s appeal dismissed accordingly