MUMBAI: The income tax department
cannot levy penalty on a taxpayer, if he makes an incorrect claim but
furnishes all relevant particulars of income , according to a Bombay High Court
order. The August 14 order was given by a division bench comprising
Justice SJ Vazifdar and Justice MS Sanklecha in an appeal filed by the
I-T department against Aditya Birla Nova.
In this case, the department rejected the claim of the taxpayer company , Aditya Birla Nova, of a deduction of over Rs 11 lakh on the ground that it is not an industrial undertaking. The I-T department also disallowed a deduction of over Rs 9 lakh claimed due to reduction in the value of shares. This was disallowed on the ground that the shares were held as an investment. Therefore, profits and losses on the sale of shares would be considered under the head "capital gains".
The dispute between the I-T department and the company arose when the assessing officer initiated penalty proceedings under the provisions of the income tax Act for claiming deduction wrongly. The department claimed that though the company has furnished all particulars of income correctly and no false statement has been made in the return, it has made a false claim of deduction despite the fact that it was not entitled for deduction under the relevant rules. The department cited the Section 271 (1) (c) of income tax which treats as concealment of income when a taxpayer offers an explanation which he cannot substantiate.
The department cited the Supreme Court order in the case of Dharmendra Textiles & Others. The division bench did not accept the department's stand on this issue . The division bench held the view that, "to attract the provisions of Section 271, the assessee must be held to have concealed the material particulars or to have furnished inaccurate particulars. At the cost of repetition in the case, there was no concealment of any material particulars by the respondent (the company)".
In this case, the department rejected the claim of the taxpayer company , Aditya Birla Nova, of a deduction of over Rs 11 lakh on the ground that it is not an industrial undertaking. The I-T department also disallowed a deduction of over Rs 9 lakh claimed due to reduction in the value of shares. This was disallowed on the ground that the shares were held as an investment. Therefore, profits and losses on the sale of shares would be considered under the head "capital gains".
The dispute between the I-T department and the company arose when the assessing officer initiated penalty proceedings under the provisions of the income tax Act for claiming deduction wrongly. The department claimed that though the company has furnished all particulars of income correctly and no false statement has been made in the return, it has made a false claim of deduction despite the fact that it was not entitled for deduction under the relevant rules. The department cited the Section 271 (1) (c) of income tax which treats as concealment of income when a taxpayer offers an explanation which he cannot substantiate.
The department cited the Supreme Court order in the case of Dharmendra Textiles & Others. The division bench did not accept the department's stand on this issue . The division bench held the view that, "to attract the provisions of Section 271, the assessee must be held to have concealed the material particulars or to have furnished inaccurate particulars. At the cost of repetition in the case, there was no concealment of any material particulars by the respondent (the company)".
Source : http://economictimes.indiatimes.com
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