INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Concealment or furnishing of inaccurate particulars - Debatable issue -

AO initiated penalty proceedings under section 271(1)(c) on the ground that the assessee in its return had claimed notional sales tax as capital in nature, which should be held as revenue receipt in nature. Assessee submitted that notional sales tax liability in respect of sales of finished goods being in the nature of subsidy from the Government, the receipt is not liable to tax and relied upon the Supreme Court Judgment in the case of Ponni Sugars & Chemicals Ltd. 2008 TaxPub(DT) 2302 (SC) and Special Bench Judgment in the case of Reliance Industries Ltd. AO relying on judgement of Union of India v. Dharmendra Textile Processors & Others (2008) 306 ITR 277 (SC) : 2008 TaxPub(DT) 2320 SC levied the penalty. Assessee appealed to CIT(A), and submitted there that during earlier assessment year also, sales tax subsidy was treated as revenue receipt, instead of capital receipt. Relying on the same CIT(A) deleted the penalty. Aggrieved Revenue appealed to Tribunal. Held: Revenue should prove that the claim made was not sustainable in law and also the assessee had concealed the particulars of income. In order to expose the assessee to penalty, the revenue should show that there was contumacious conduct on the part of the assessee in suppressing the income in the return. The rejection of such a claim by the Appellate Tribunal does not amount to furnishing inaccurate particulars of income, thereby levying penalty under section 271(1)(c) of the Act as held by the Supreme Court in the case of Reliance Petroproducts (P.) Ltd. (2010 TaxPub(DT) 1683 (SC)). Hence, penalty levied under section 271(1)(c) for furnishing inaccurate particulars of income was deleted.

PCIT, Central-11, v. Harsh International Pvt. Ltd. ((2021) 128 taxmann.com 88 : 2021, Reliance Petroproducts (P.) Ltd. (2010 TaxPub(DT) 1683 (SC))

REFERRED :

FAVOUR : In favour of the assessee.

A.Y. : 2007-08

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