Calcutta H.C : Where assessee claimed deduction on account of interest knowingly on a wrong basis, penalty under section 271(1)(c) was rightly levied

High Court Of Calcutta

Gourav Goenka vs. ACIT

Assessment Year : 2007-08

Section : 271(1)(c)

Girish Chandra Gupta And Tapash Mookherjee, JJ.

IT Appeal No. 119 Of 2012

I.T.A.T. No. 199 Of 2012

March 21, 2014


Tapash Mookherjee, J. – The present appeal under section 260A of the Income-tax Act, 1961, is directed against an order dated March 22, 2012, passed by the Income-tax Appellate Tribunal “B” Bench, Kolkata, in I.T.A. No. 981/Kol/2011 dismissing an appeal preferred by the assessee.

2. The facts and circumstances briefly stated are as follows :

The appellant, Shri Gourab Goyenka, an individual, filed his income-tax return for the assessment year 2007-08 claiming deduction of Rs. 8,00,000 (rupees eight lakhs only) allegedly paid by him on account of interest. His case was selected for scrutiny. Appropriate notice was issued. After a few dates fixed by the Assessing Officer, the appellant appeared through his authorised representative and confessed to have made a mistake in claiming the aforesaid deduction. He submitted a revised return and paid the applicable tax. The Revenue, however, considered that it was a case of intentional and deliberate attempt on the part of the appellant to evade tax. Hence, a proceeding for penalty under section 271(1)(c) of the Income-tax Act was initiated which culminated in an order imposing penalty of a sum of Rs. 2,25,338 (rupees two lakh twenty-five thousand three hundred thirty-eight only). An appeal filed before the Commissioner of Income-tax (Appeals) – XVII, Kolkata, was dismissed. The appellant preferred an appeal before the Income-tax Appellate Tribunal, Kolkata, which has been dismissed on March 22, 2012, which is under challenge before this court. The following question was pressed.

“Whether, on the facts and in the circumstances of the case, the Tribunal ought to have considered that in cases involving imposition of penalty one principle which was always to be kept in mind that every addition in assessment could not automatically make out a case for concealment of income or furnishing of inaccurate particulars of income.”

3. Learned advocate for the appellant argued that all kind of errors in the income-tax return and/or all kinds of inaccurate claims in the return do not ipso facto amount to intentional concealment attracting penalty. Under section 271(1)(c) of the Income-tax Act and the Assessing Officer as well as the appellate authorities did not consider the matter in the right perspective. Learned advocate for the appellant added that the mistaken claim was an accidental error for which such a huge amount of penalty should not have been imposed, especially when the return originally submitted was revised and the tax on such revised return was duly paid by the appellant during the proceeding itself. Learned advocate for the appellant cited a decision reported in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC), in support of his contention. The relevant portion of the judgment is quoted below (headnote) :

“A glance at the provisions of section 271(1)(c) of the Income-tax 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 inaccurate particulars of his income. The meaning of the word ‘particulars’ used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.

Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars.”

4. On the other hand, learned advocate for the respondent submitted that the wrong claim of deduction was not due to any accidental mistake or misunderstanding, for in that case he would have attempted to justify his claim which he admittedly did not do. He added that had the case not been picked up for scrutiny the petitioner would have succeeded in evading a huge amount of tax. The decision referred to by the appellant has no application to the present case.

5. We have considered the rival submissions and are of the opinion that the judgment in the case of Reliance Petroproducts (P.) Ltd. (supra) does not apply to this case for the following reasons.

6. The assessee in this case admittedly furnished inaccurate particulars and sought to avoid liability to pay tax on that basis. It was not a bona fide mistake. The assessee did not establish by any cogent evidence that inaccurate particulars were furnished accidentally or by mistake. Deduction was claimed knowingly on a wrong basis. Therefore, penalty was rightly imposed. We are, however, of the view that the amount of penalty should be reduced by 50 per cent. considering that there is nothing to show any antecedent. The penalty is thus reduced to Rs. 1,14,000 (rupees one lakh forty thousand only). The appeal is allowed to that extent.

7. In case the total amount of fine has already paid by the appellant, the excess amount as per this judgment shall be refunded together with interest.

8. The appeal is thus disposed of without any order as to costs.

9. Urgent xerox certified copy of this judgment, if applied for, be supplied to the learned advocates for the parties upon compliance with all formalities.

[Citation : 364 ITR 186]