WELLMAC PLASTICS, MUMBAI vs. DCIT 15(2), MUMBAI

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ITA 4099/MUM/2016Status: DisposedITAT Mumbai23 May 2017AY 2009-103 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 there was no concealment or furnishing of inaccurate particulars of income. A mere disallowance of a claim due to interpretation of a section does not warrant a penalty under Section 271(1)(c) unless the claim was fanciful or non-bonafide.

What were the facts?

The assessee appealed against a penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was related to the disallowance of interest on FDRs used as bank guarantee and the disallowance of deduction under Section 80IB(4) by treating labour charges as unexplained income.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when a deduction claim is disallowed due to interpretation of law, and not due to concealment or inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 80IB

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI

Before: SHRI G.S.PANNU & SHRI RAVISH SOOD

For Appellant: Shri Bhupendra Shah
For Respondent: Shri Durga Dutt
Hearing: 23/05/2017Pronounced: 23/05/2017

ORDER PER G.S.PANNU,A.M:

The captioned appeal filed by the assessee pertaining to assessment year 2009-10 is directed against an order passed by CIT(A)-42, Mumbai dated 21/04/2016, which in turn, arises out of an order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’) dated 29/01/2014.

2.

In this appeal, assessee has raised the following Grounds of appeal.

“ 1. In the facts and the circumstances of law, the Assessing Officer erred levying penalty U/S 271(1)(c) amounting to Rs.

1,16137/- in respect of disallowance of interest on FD kept as bank guarantee with electricity dept and by way of disallowing deduction u/s. 80IB(4) by treating the labour charges as unexplained income.

2. In the facts and the circumstances of law, the Assessing Officer erred levying penalty u/s. 271(1)(c) in respect of additions amounting to Rs. 3,41,679/- instead of addition sustained by the Commissioner of Income Tax(A) amounting to Rs. 74,821/- on which penalty was initiated.

3. In the facts and circumstances of the case and in law, the learned Commissioner of Income Tax(A) erred in confirming the same by disregarding several judgments cited.”

3.

At the time of hearing, the Ld.Representative for the assessee has disputed the levy of penalty of Rs.1,16,137/- only in respect of the denial of deduction under section 80IB of the Act with respect to the interest on FDRs kept as bank guarantee with the electricity department for obtaining power connection. Ground No.2 above has not been pressed at the time of hearing, therefore, the same is dismissed as not pressed.

4.

After hearing the rival parties, in our view, there is no concealment or furnishing of inaccurate particulars of income within the meaning of under section 271(1)(c) of the Act, qua the aforesaid disallowance, because it is a case where the claim for deduction has been found to be untenable. Mere disallowance of a claim by interpreting the provisions of a section does not justify the penalty under section 271(1)(c) of the Act unless it can be shown that the claim was either fanciful or non-bonafide. No such findings emerge from the orders of the authorities below and, therefore, in terms of the ratio of the judgment of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts Ltd., 322 ITR 158 (SC), the penalty levied under section 271 (1)(c) of the Act is hereby directed to be deleted. We hold so.

5.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on conclusion of the hearing in the presence of both the parties on 23/05/2017.

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