The mere rejection of a deduction claim is not punishable under Section 271(1)(c)
Fact and issue of the case
Present appeal has been filed by the assessee against the order of the ld.Commissioner of Income Tax (Appeals)-9, Ahmedabad dated 11.07.2019 passed under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as “the Act” for short) vide which the ld.CIT(A) confirmed order of the AO passed, levying penalty for concealing/furnishing inaccurate particulars of income under section 271(1)(c) of the Act for the Asst.Year1997-98.
The grounds raised by the assessee are as under:
i) In law and in facts and circumstances of the appellant’s case, the ld.CIT(A) has grossly erred in points of law and facts.
ii) In law and in facts and circumstances of the appellant’s case, the ld.CIT()A) has grossly erred in dismissing appellant’s case ground regarding passing order u/s.271(1)(c) of the Act beyond the prescribed time.
iii) In law and in facts and circumstances of the Appellant’s case, the ld.CIT(A) has grossly erred in confirming penalty levied u/s.271(1)(c) of the I.T.Act for Rs.47,55,054/-.
As transpires from order of the authority below penalty under section 271(1)(c) of the Act, for concealing/ furnishing inaccurate particulars of income, was levied by the AO to the tune of Rs.52,46,045/- which was confirmed by the ld.CIT(A) to the extent of Rs.47,55,054/- noting the fact that initial additions made by the AO on which penalty was levied amounting to Rs.1,22,00,106/- had been curtailed to the extent of Rs.1,14,96,058/- resulting in penalty of Rs.47,55,054/-.
Observation of the court
Having said so, we have also noted that on the issue of nature of interest income earned on FDs and loans there are decisions of Hon’ble High Courts holding that it is in the nature of business income more particularly where the FDs have been created for statutory components and regulations. Therefore, there is no doubt that the issue of denial of claim of deduction under section 80HH/80IA of the Act on interest on FDs and others, is a debatable issue, and considering the fact that it is not the case of the Revenue that the assessee has not furnished complete particulars relating to the same or has concealed any particulars of income relating to the same the mere denial of claim of deduction will not tantamount to concealment of income and/or furnishing of inaccurate particulars of income so as to attract levy of penalty under section 271(1)(c) of the Act. The proposition of law in this regard has been settled by the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro-products P. Ltd (supra). In view of the above, we see no reason to uphold order of the ld.CIT(A) and we direct the AO to delete the penalty levied in entirety. The grounds of appeal of the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 12th July, 2023 at Ahmedabad.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Nirma-Limited-Vs-DCIT-ITAT-Ahmedabad-2
