S. 271(1)(c) : Denial of claim for deduction resulting into higher assessed income cannot be ground for imposition of penalty

16 Nasu Properties Pvt. Ltd. v. ITO

ITAT ‘I’ Bench, Mumbai

Before K. C. Singhal (JM) and

D. K. Srivastava (AM)

ITA Nos. 1160 and 1161/Mum./2006

A.Ys. : 2000-01 and 2001-02. Decided on : 21-1-2008

Counsels for assessee/revenue : Jayesh Dadia/Ashima Gupta

S. 271(1)(c) of the Income-tax Act, 1961 — Penalty for concealment of income — Claim for deduction denied resulting into higher assessed income — Whether AO justified in imposing penalty — Held, No.

Per D. K. Srivastava :

Facts :

The assessee’s claim for deduction of Rs.5 lacs towards diminution in the value of investment was disallowed by the AO and confirmed in appeal by the CIT(A) as well as the Tribunal.

In response to the show-cause notice with reference to the penalty u/s.271(1)(c), the assessee contended that full facts necessary for the assessment were disclosed in the return of income filed. Therefore, it did not amount to concealment of income. However, the AO levied the penalty which was confirmed by the CIT(A).

Held :

The Tribunal noted that the assessee had furnished all the relevant particulars in its return of income. Thus, the charge of furnishing of inaccurate particulars of income by the assessee was not established. According to it, simply because the Departmental authorities had not accepted the claim of the assessee or the assessee had lost appeals filed against the orders of the Departmental authorities, dismissing the claim of the assessee, cannot ipso facto lead to the establishment of charge of furnishing of any inaccurate particulars of income. Accordingly, the penalty levied was cancelled by the Tribunal.