Opinion Of Eminent Legal Luminaries On Controversial Issues

When Can S. 271(1)(c) Be Applied?

QUERY: Whether penalty under section 271(1)(c) is leviable for disallowance of amount under section 40(a)(ia) for non deduction or short deduction or late deduction of tax at source on the ground that assessee has filed inaccurate particulars?
ANSWER: The Supreme Court in CIT v. Reliance Petro Products Ltd. [322 ITR 158] has held as under:

“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 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 penalty under section 271(1)(c). A mere making 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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