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

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ITA 1036/DEL/2018Status: DisposedITAT Delhi26 July 2018AY 2013-143 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a mere disallowance of expenses does not automatically attract penalty under Section 271(1)(c) if the claims were made bona fide and all particulars were furnished. The Supreme Court's decision in CIT vs. Reliance PetroProducts Private Ltd. was cited.

What were the facts?

The assessee filed its return of income. The Assessing Officer made additions under Section 14A and for membership fees and interest on late payment. A penalty was imposed under Section 271(1)(c) based on these additions.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable solely on the basis of disallowance of expenses claimed bona fide, without any evidence of bogus claims.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI

Before: Mr. R.S. SYAL

Hearing: 25.7.2018Pronounced: 26.7.2018

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.

2.

Briefly stated the facts of the case are that the assessee filed return declaring total income of Rs. 22,66,770/-. The Assessing Officer made addition of Rs.3,01,220/- under section 14A of the Act read with Rule 8D.

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.

3.

I have heard both the sides and perused the relevant material on record.

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.

4.

In the result, the appeal is allowed.

(Order pronounced in the open court on 26.7.2018.)

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