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SC: Claim doesnt amount to giving false I-T particulars
March, 26th 2010

The Supreme Court has ruled that a mere claim made by the assessee or its disallowance by the assessing officer does not amount to furnishing of inaccurate particulars in the return for the purposes of imposition of penalty under the provision of the Income-Tax Act.

A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars, said a bench comprising Justice VS Sirpurkar and Justice MK Sharma.

The court rejected the plea of revenue department which had said that the falsehood in the return filed by the assessees can be camouflaged in two forms. First, an item of receipt may be suppressed fraudulently. Second, an item of expenditure may be falsely (or in an exaggerated amount) claimed.

Both types are attempt to reduce the taxable income and, therefore, they amount to concealment of particulars of ones income as well as furnishing of inaccurate particulars of income in the return, inviting initiation of penalty provision in accordance with section 271 (1) (c) of the income-tax department Act, it had said.

If we accept the contention of the revenue then in case of every return where the claim made is not accepted by assessing officer for any reason, the assessee will invite penalty under Section 271(1)( c). That is clearly not the intendment of the Legislature, the court said.

Mukesh Ambanis owned Reliance Petroproducts had told the apex court that merely making of a claim which was disallowed by the assessing officer cannot be the treated as furnishing of the inaccurate particulars and ground for levy of penalty under provision of IT Act.

The court, agreeing with it, said, It was up to the authorities to accept its claim in the return or not.

Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)( c) (IT Act).

The court perusing the meanings of the words inaccurate and particulars, said, reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. But simply claim by the assessee and its disallowance by the department cannot be amount to furnishing of inaccurate particulars , court added.

Reliance Petroproducts for the assessment year of 2001-02 had filed its return declaring a loss of Rs 26,54,554. The assessment was finalised under section 143(3) of the act on November 25, 2003 whereby the total income was determined at Rs 2,22,688.

The department had started penalty proceedings under section 271(1)( c) of the act on account of concealment of income/furnishing of inaccurate particulars of income.

The expenditure was claimed by the assessee on the basis of expenditure made for paying the interest on the loans incurred by it by which amount the assessee purchased some IPL shares by way of its business policies. However, admittedly, the assessee did not earn any income by way of dividend from those shares. The company in its return claimed disallowance of the amount of expenditure for Rs 28,77,242 under section 14A of the act.

The commissioner of income-tax (appeals ), however, had deleted the penalty levied by the assessing officer. The Income-Tax Appellate Tribunal had confirmed the order of the commissioner (appeals). The Gujarat High Court had also dismissed departments appeal which finally had came to the apex court.

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