M/S. FINE FOOD INDUSTRIES,BHAVNAGAR vs. THE ITO, WARD-2(4), BHAVNAGAR

As per grounds of appeal, the assessee has challenged the jurisdiction of the AO under s. 271(1)(c) of the Act as well as imposition of penalty of Rs.94,820/- on merits.

When the matter was called for hearing, the learned AR for the assessee pointed out that the penalty has been imposed on denial of deduction under s.80IB of the Act towards insurance claim received Rs.1,29,927/-; subsidy received Rs.85,300/-; duty drawback claim received Rs.31,109/- and addition on account of accrued interest from PGVCL Rs.60,530/- not recognized by the assessee.

It is ostensible from the record that AO has denied the deduction under s.80IB of the Act in respect of certain items on the ground that such income does not bear nexus with the manufacturing activity. The expenditure claimed has not been disputed per se. It is well settled that incorrect claim of expenditure would not amount to giving inaccurate particulars of income as held by the Hon’ble Gujarat High Court in the case of CIT vs. Amol Dicalite Ltd. [2015] 55 taxmann.com 419 (Guj). Needless to say, the imposition of penalty on additions/disallowances is not automatic. The bonafides in the action of the assessee is not disputed per se. Such erroneous claim on the part of the assessee in our view would not invite the rigors of Section 271(1)(c) of the Act. Thus, penalty imposed by the AO is deleted on merits. We do not seek to deal with the legal

In the result, appeal of the Assessee is allowed.