4A FINANCIAL SECURITIES LTD,NEW DELHI vs. ACIT, CIRCLE-1, , NOIDA

This appeal by the assessee is directed against the order passed by the CIT(A) on 25.9.2017 upholding the penalty of Rs. 1,28,300/- imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act) in relation to the A.Y. 2013-14.

Another addition of Rs.1,13,790/- was made towards claim for membership fees amounting to Rs. 14,484/- and interest on late payment Rs.99,306/-.

These two additions formed the bedrock of the edifice of instant penalty, which came to be affirmed in the first appeal.

It is evident from the discussion made above that such penalty has been imposed on making disallowance of certain expenses. But for that, there is nothing on record to show that the assessee lodged bogus claims in respect of these expenses. That apart, the expenses were claimed by the assessee in a bona fide manner. The mere fact that the above disallowances have been made do not bring a case within the parameters set out in section 271(1)(c) of the Act. The Hon’ble Supreme Court in CIT vs. Reliance PetroProducts Private Ltd.(2010) 322 ITR 158 (SC) has held that a mere making of a claim which is not sustainable in law, by itself will not attract penalty 271(1)(c) of the Income-tax Act, when the assessee furnishes all the relevant particulars in his return which are not found to be inaccurate. There is no dearth of decisions holding that penalty under section 271(1)(c) cannot be imposed on disallowance of expenses, which were not otherwise bogus. I, therefore, set aside the impugned order and direct to delete the penalty.

(Order pronounced in the open court on 26.7.2018.)