The Delhi high court has held that an entity seeking tax deduction cannot be penalised just because it has not supported the claim with documents in its annual return.
The judgement was passed on a petition filed by the Income Tax Department, seeking imposition of penalty on the Industrial Finance Corporation of India Limited because it had allegedly furnished 'inaccurate particulars' of income to claim tax deduction.
"It is a case where a claim put forth by the assessee (tax payee) as regards the loss was not accepted, but that would not per se tantamount to furnishing any kind of inaccurate particulars.
Thus, in our considered opinion, there has been no concealment of income or furnishing of inaccurate particulars," a bench comprising Chief Justice Deepak Mishra and Justice Madan B Lokur said.
Earlier, the IFCI's stand was rejected by the assessment officer on the grounds that it had made certain claims by way of business expenditure in the annual return, but was unable to substantiate them.
The financial institution had contended that as all the details pertaining to the computation of income were disclosed in its annual tax return, the matter could not be treated as a case of concealment or submission of false particulars.
The Income Tax Tribunal, however, accepted the plea of the financial institution and held that there had been no furnishing of inaccurate particulars of income and the assessee had declared everything in its annual return.
"In the case at hand, the assessee had filed the return and furnished all the particulars.
"The IFCI explained during the penalty proceedings that the investments were written off in the books of account and were claimed as deduction on account of the loss occurred to it in the computation of the total income," the court noted.
It also rejected the I-T department's contention that it was obligatory for the assessee to prove that there was no fraudulent intention on its part for allegedly filing inaccurate particulars of income.