Making of a Claim which is not Sustainable in Law would not render Penal Liability: ITAT

M/s. Rashtriya Ispat Nigam Ltd. vs JCIT(OSD),Circle-3(1), the assessee is a Cooperative Society and claimed exemption of Rs.1.45 crores under section 80P of the I.T. Act, 1961. During the assessment proceedings,  it was noticed that assessee had received interest of Rs.17,67,059 which is also claimed exempt. It was claimed by the assessee that interest of  Rs.11,92,784 was paid and therefore, net interest was only at Rs.5,74,275. Finally, after discussion, assessment was completed at net taxable income of Rs.5,74,275. However, the proceedings under section 263 were initiated and it was noticed that interest of Cooperative Society and claimed exemption of Rs.1.45 crores under section 80P of the I.T. Act, 1961. During the assessment proceedings, it was noticed that assessee had received interest of Rs.17,67,059 which Is also claimed exempt. It was claimed by the assessee that interest of Rs.11,92,784 was paid and therefore, net interest was only at Rs.5,74,275. Finally, after discussion, assessment was completed at net taxable income of Rs.5,74,275. However, the proceedings under section 263 were initiated and it was noticed that interest of Rs.11,92,784 could not have been deducted out of the interest recovered in terms of Section 14A of the I.T. Act. The assessee agreed for the addition. The A.O. accordingly made addition of RS.11,92,784 as the same was not allowable in terms of Section 14A of the I.T. Act. The A.O. vide separate order levied penalty under section 271(1)(c) of the I.T. Act. The assessee explained before Ld. CIT(A) that it is an estimated addition and assessee has not concealed the particulars of income. The Ld. CIT(A), however, dismissed the appeal of assessee.

The Appellate Tribunal finding in favour of the assesse held that the assessee declared the interest received which was claimed exempt as well as explained the interest paid. The Ld. CIT however, did not accept the contention of assessee. Therefore,  it is not the case of concealment of particulars of income. Ultimately,  it is a case where expenses have not been allowed. Therefore, mere making a claim which is not sustainable in Law, by itself would not amount to furnishing inaccurate particulars of income or to conceal the particulars of income. The Tribunal relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products P. Ltd.,322 ITR 158. It may also be noted here that assessee specifically.