ITAT: Merely Making Unsustainable Claim, Will Not Amount to Furnishing of Inaccurate Particulars of Income

ITAT: Merely Making Unsustainable Claim, Will Not Amount to Furnishing of Inaccurate Particulars of Income

The Income Tax Appellate Tribunal (in short ITAT), Pune bench observed that when an assessee has not agitated the addition in the appellate proceedings, it does not amount to either concealment of income or furnishing of inaccurate particulars of income.

The Judicial Member, S.S. Vishwanethra held that the appellant cannot be held guilty of furnishing inaccurate particulars of income and, therefore, the Assessing Officer was not justified in levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').

The appeal was filed by the assessee- Galaxy Construction and Contractors Pvt. Ltd against the order of the ld. Commissioner of Income Tax (Appeals) [in short CIT(A)] dated 11th July, 2019 for the assessment year 2014-15 confirming the levy of penalty of Rs. 34,50,500 under Section 271(1)(c) of the Act.

The facts of the case were that the appellant is a private limited company incorporated under the provisions of the Companies Act, 1956, and engaged in the business of execution of civil contracts. The Return of Income for the assessment year 2014-15 was filed on 29th November, 2014 declaring total income of Rs. Nil.

Against the said return of income, the assessment was completed by the Dy. Commissioner of Income Tax, Pune ('the Assessing Officer') vide order dated 29th December, 2016 passed under Section 143(3) at a total income of Rs. 1,11,64,130 after making disallowance of interest u/s 36(1)(iii) of Rs. 1,06,34,568, disallowance of Rs 5,45,398 under Section 14A and disallowance of interest on TDS of Rs. 1,03,940.

It was found that the additions made by the Assessing Officer were not agitated in the appellate proceedings. Thus, the additions made by the Assessing Officer had attained the finality. Subsequently, the Assessing Officer initiated the penalty proceedings and levied penalty of Rs. 34,50,500 under Section 271(1)(c) in respect of disallowance of interest under Section 36(1)(iii) by holding that the appellant was guilty of concealing inaccurate particulars of income vide order dated 28th June, 2017 and also rejected the contention of the appellant that no disallowance under Section 36(1)(iii) was required in view of the fact that the own funds were utilized for making the advances to the sister concern for the business purpose.

Being aggrieved, the appellant filed an appeal before the CIT(A) who vide impugned order confirmed the levy of penalty on the ground that the appellant had failed to substantiate that the advance was made for business purpose.

Aggrieved by the decision of CIT(A), the appellant filed an appeal before the ITAT however none appeared on the behalf of the appellant-assessee despite due service of notice of hearing.

The ITAT found that it was an admitted fact that the appellant had not agitated the additions in the appellate proceedings.

"It is clearly settled position of law that when an assessee not agitated the addition in the appellate proceedings does not amount to either concealment of income or furnishing of inaccurate particulars of income. We have carefully gone through the assessment order and find that the addition u/s 36(1)(iii) was made by the Assessing Officer because the appellant had failed to demonstrate the advances to sister concern were made for the business purpose," observed the ITAT.

Further reference was placed on decision passed by the Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010), which held a mere making claim which is not sustainable by law itself will not amount to furnish inaccurate particulars of income.

In the light of above legal position, the ITAT was of the considered opinion that the appellant cannot be held guilty of furnishing inaccurate particulars of income and, therefore, the Assessing Officer was not justified in levy of penalty under Section 271(1)(c) of the Act and therefore, directed the Assessing Officer to delete the penalty of Rs. 34,50,500 levied under Section 271(1)(c) of the Act.