Penalty u/s 271(1)(c) cant mechanically be imposed due to disallowance of any expenditure or deduction claimed by taxpayer: Pune ITAT

Read order: Mrs. Villo Noshir Anklesaria v. The Assistant Commissioner of Income Tax 

Pankaj Bajpai

Pune, July 23, 2021: Allowing the appeal of a taxpayer, the Pune ITAT has ruled that a misconceived or wrong claim for deduction or exemption in the return of income filed does not automatically attract penalty under section 271(1)(c) of the Income Tax Act.

Observing that penalty can’t be levied just for making wrong claims made advertently or inadvertently, the Bench of Inturi Rama Rao (Accountant member) and Partha Sarathi Chaudhury (Judicial member) reiterated that I-T Authorities have not given any findings regarding either “concealment of income” or “furnishing of inaccurate particulars of income” by the taxpayer. 

The penalty in the instant case came to be levied u/s 271(1)(c) of the Income Tax Act on the taxpayer simply because the claim made by appellant for deduction u/s 54F of the Act was not correct claim as per observation of the Department. 

After considering the arguments, the Tribunal opined that the Lower Authorities have not given any findings regarding either “concealment of income” or “furnishing of inaccurate particulars of income” by the assessee. 

“Karnataka High Court in the case of CIT & Anr. vs Manjunatha Cotton and Ginning Factory, has opined that since penalty proceedings are separate proceedings than that with assessment, the charges must be specific and facts and circumstances should demonstrate that there is concealment of income or furnishing of inaccurate particulars of income,” said the Tribunal. 

The Pune ITAT therefore noted that the assessee had declared the full facts and the full factual matrix were before the AO while passing the assessment order. 

Highlighting that it is another matter that the claim based on such facts were found to be inadmissible, the Pune ITAT concluded that it is not the same thing as furnishing of inaccurate particulars of income as contemplated u/s 271(1)(c) of the Act.