Penalty: Concealment: Section 271(1)(c): A. Y. 2002-03: Assessee, a limited company, made a claim for deduction of loss in the course of assessment proceedings: AO rejected the claim and imposed penalty u/s. 271(1)(c): Penalty not justified: Liberal view is required to be taken as necessarily the claim is bound to be scrutinised both on facts and law:

For the A. Y. 2002-03, in the course of the assessment proceedings u/s. 143(3), the assessee company made a claim that the loss of Rs. 95.55 lakh on account of loan granted to its subsidiary DCM International Ltd., which was written off, was deductible as business expenditure or in alternative as capital loss. The Assessing Officer disallowed the claim and also imposed penalty u/s. 271(1)(c) for concealment of income. The Tribunal deleted the penalty.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) It is not disputed or denied that the loan in fact was granted and has been also written off. There was no concealment or furnishing of inaccurate facts. Case is completely covered by Explanation 1 to section 271(1)(c). It is not disputed that full factual matrix or the facts were before the Assessing Officer at the time of assessment when this claim was made. The fact that scrutiny assessment was pending is a relevant and important circumstance to show the bona fides of the assessee as he was aware that the claim would be examined and would not go unnoticed.

ii) Secondly, the claim was rejected in view of the legal position, which was against the assessee and not because of statement of incorrect or wrong facts. Law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible. When such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinised both on facts and in law. Full probe is natural and normal.

iii) Threat of penalty cannot become a gag and/ or haunt on assessee for making a claim which may be erroneous or wrong, when it is made during the course of the assessment proceedings. Normally penalty proceedings in such cases should not be initiated unless there are valid or good grounds to show that factual concealment has been made or inaccurate particulars on facts were provided in the computation.

iv) There is no merit in the present appeal and the same has to be dismissed.”