Penalty Under Section 271(1)(c) Cannot Be Imposed When No Income is Concealed: ITAT

The Income Tax Appellate Tribunal (ITAT), Bangalore, has ruled that a penalty under Section 271(1)(c) cannot be levied if there is no hidden income or furnishing of inaccurate particulars.

The assessee, Smt Subbalakshmi Kurada, filed her return declaring income from house property and interest. The AO observed that she had divided the rental income into rent and hire charges for amenities and had reinvested capital gains jointly with her son. The AO did not accept the bifurcation and the reinvestment of capital gain. As a result, he made an income addition and also levied a penalty under section 271(1)(c) for furnishing inaccurate particulars.

The taxpayer argued that all the details regarding the rental income and the capital gains were disclosed in the ITR. She said that the classification dispute and capital gain exemption denial cannot result in levying a penalty under section 271(1)(c) of the Income Tax Act. She argued that there is no concealment of income or furnishing of inaccurate particulars. Also, previous Tribunal rulings had already accepted the deduction under Section 54.

The ITAT cited the Supreme Court’s ruling that a mere wrong claim, without concealing facts, does not amount to “furnishing inaccurate particulars“. Since there was no concealment of income or furnishing of inaccurate particulars, there was no reason for imposing a penalty u/s 271(1)(c).

Therefore, the assessee’s appeal was allowed.