Opinion Of Eminent Legal Luminaries On Controversial Issues

Penalty – Concealment

QUERY: The assessee purchased material for construction of his factory building and partly for use of his manufacturing process. The A.O. held the purchase as bogus and added amount to total income. The A.O. levied penalty u/s. 271(1)(c) on entire sum added in spite of fact that major part was not claimed under any head (capital expenses debited to building account). Is there any way for exclusion of the said amount? Can any sum not chargeable under the law be considered for penalty u/s. 271(1)(c)?
ANSWER: Section 271(1)(c ) of the Act provides for levy of penalty for concealing the particulars of income or furnishing inaccurate particulars of such income.
From the fact, it is clear that the assessee had purchased the material for construction of factory building and use of his manufacturing process. Majority part of the material was capitalised as used for factory building. But the same was held by AO as bogus purchases. Hence the assessee should file an appeal before the CIT(A) to prove that the purchases are genuine by adducing cogent material/evidence
Further, there is no concealment of the particulars of income, as only some of the purchases have been considered as bogus.
In CIT v. Reliance Petroproducts Pvt. Ltd. [322 ITR 158] the Supreme Court held that making an incorrect claim does not amount to furnishing inaccurate particulars. In the said judgment, the Supreme Court has observed :
“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.”


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