August 2019

14. Section 271(1)(c) – Penalty – Concealment – Two views are possible – When two views are possible, penalty cannot be imposed

AJAY R. SINGH
Advocate

14.  Section 271(1)(c) – Penalty – Concealment – Two views are possible – When two views are possible, penalty cannot be imposed

 

The assessee is a co-operative bank. It had incurred expenditure for acquisition of three co-operative banks. Claiming directives of the RBI contained in its circular, the bank amortised such expenditure over a span of five years. The Revenue was of the opinion that the expenditure was capital in nature and that the claim of expenditure would be governed by the Income-tax Act, 1961 and not by the directives of RBI. The expenditure was therefore disallowed.

 

The AO initiated proceedings for imposition of penalty u/s 271(1)(c) and held that the assessee has deliberately made a wrong claim of deduction which is otherwise inadmissible. Accordingly, the AO proceeded to pass an order imposing a penalty of Rs. 1,41,30,553 u/s 271(1)(c).

 

Being aggrieved at the penalty order so passed, the assessee preferred an appeal before the CIT(A). The CIT(A) observed that the AO had taken a view that the expenditure is capital in nature due to the enduring benefit accruing to the assessee, but as per the RBI circular the assessee is allowed to amortise 1/5th of the expenditure over a period of five years. He, therefore, inferred that there exist two different views with regard to the assessee’s claim. Accordingly, he held that the issue on which the addition was made being a debatable one, it cannot be sai

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