Variance In Allowable Deductions Doesn't Amount To Furnishing Inaccurate Particulars Of Income: Bombay High Court

The Bombay High Court has held that the assessee cannot be said to furnish inaccurate particulars of income merely for variance in allowable deductions.

The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the ITAT was of the view and rightly so that the assessee had made a bona fide claim under Section 36(1)(viii), as such deductions claimed are linked to the business profit. Only because there was variance in the deductions allowable due to a change in the determination of business profit can it be said that the assessee has furnished inaccurate particulars of income or concealed inaccurate particulars of income.

The assessee-respondent, a banking company, filed its return of income for AY-1999-2000, declaring total income under the normal provisions. The assessee also declared book profit under Section 115JA of the Income Tax Act of 1961. Subsequently, the assessee filed a revised return of income, declaring total income and book profit. The Assessing Officer (AO) completed the assessment by disallowing certain deductions.

The assessee challenged the assessment order before the Commissioner of Income Tax (Appeals) (CIT(A)) and before the ITAT. When the assessee's appeal was pending before the ITAT, the AO issued a notice to the assessee under Section 271(1)(c), and the allegation was that the additions made in the assessment order were a result of the furnishing of inaccurate particulars of income or concealment of income by the assessee. The assessee's objections were rejected, and the AO passed an order imposing a penalty under Section 271(1)(c).

In the appeal filed by the assessee, the CIT (A) deleted the penalty imposed by the AO. The Department challenged that order of CIT(A) before the ITAT, and the ITAT upheld that finding of CIT(A).

The department contended that in the return of income, the assessee did not claim certain deductions during the course of the assessment proceedings. The assessee claimed deductions and has furnished inaccurate particulars of income. It is the department's case that only because the assessee has offered income and not claimed deductions in the return of income would it absolve the assessee from the liability of Section 271(1)(c).

The court noted that the ITAT correctly held that provisions of Section 271(1)(c) of the Act are not attracted. In the case of every return where the claim sum is not accepted by the AO for any reason, the assessee will invite a penalty under Section 271(1)(c). A mere making of the 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 inaccurate particulars.

Counsel For Petitioner: Suresh Kumar

Counsel For Respondent: A Vissanji

Case Title: Pr. Commissioner of Income Tax V/s. ICICI Bank Ltd

Case No.: Income Tax Appeal No. 1067 Of 2018

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