Where the assessee has made false claim for deduction under Section 801B of the Income Tax Act, penalty is levied under Section 271(1) (c) of the Act. This was held by the High Court of Punjab and Haryana at Chandigarh in the case of Commissioner of Income Tax, Ludhiana Versus M/s Tudor Knitting Works Pvt. Limited being ITA No.122 of 2012 (O&M).
Brief facts of the case:
The respondent-assessee was a company dealing with manufacturing of hosiery goods at Ludhiana. A survey under Section 133A of the Income Tax Act was done in the premises of the assessee where its business was carried out. It revealed undeclared income to the tune of Rs.1.20 crores under several heads. The said income was offered to tax. But the assessee claimed deduction on it under Section 80IB of the Act including the surrendered Income of Rs.1.20 crores. The assessment was completed after disallowing the claim of deduction under section 801B of the Act.
The Tribunal held that making false does not amount to furnishing incorrect particulars unless it appears that the assessee had acted mala fide. Upon perusal of the findings, the Tribunal found that the assessee claimed deductions for set off of some business losses against its income from capital gains, which does not prove its mala fide intention. The Tribunal observed that the assessee revealed all the particulars along with its filed return; as such it was not a fit case for imposing penalty.
The revenue preferred the appeal under Section 260A of the Income Tax Act against the order dated 31.10.2011 challenging the order passed by the Income Tax Appellate Tribunal as the same was not justified in not levying penalty under Section 271(1) (c) of the Act.
The High Court upheld the view of the Tribunal in favor of the assessee. It was stated that if the intention was found to be malafide, penalty should be imposed.
After hearing learned counsel for both the parties and upon perusing the record, Justice Ajay Kumar Mittal did not find any merit in the appeal. It was nowhere found that any details furnished by the assessee in its return were incorrect or erroneous. As such, there was no question of imposing the penalty under Section 271(1) (c) of the Act. A mere making a claim, not sustainable in law, does not amount to furnishing false particulars on behalf of the assessee. Merely as the assessee has made a claim of deduction for its expenditure which was not accepted by the Revenue, would not attract the penalty under Section 271(1) (c) of the Act. As such, no question of attracting a penalty under Section 271(1) (c) arises at all. In view of the above, the appeal was dismissed.