The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that a mere making claim which is not sustainable by law does not amount to furnishing inaccurate particulars of income and Penalty under section 271(1)(c) of the Income Tax Act, 1961 is not imposable.
Galaxy Construction and Contractor, the appellant is a private limited company engaged in the business of execution of civil contracts. The Return of Income for the assessment year 2014-15 was filed on 29.11.2014 declaring a total income of Rs.Nil.
The assessment was completed vide order dated 29.12.2016 passed u/s 143(3) at a total income of Rs.1,11,64,130/- after making disallowance of interest u/s 36(1)(iii) of Rs.1,06,34,568/-, disallowance of Rs.5,45,398/- u/s 14A and disallowance of interest on TDS of Rs.1,03,940/-.
The Assessing Officer initiated the penalty proceedings and levied a penalty of Rs.34,50,500/- under section 271(1)(c) in respect of disallowance of interest u/s 36(1)(iii) by holding that the appellant is guilty of concealing inaccurate particulars of income vide order dated 28.06.2017 and also rejecting the contention of the appellant that no disallowance u/s 36(1)(iii) was required since the own funds were utilized for making the advances to the sister concern for the business purpose.
The CIT(A) also rejected the contention of the appellant that the penalty order is not valid for non-striking of the relevant column of the satisfaction in the show-cause notice issued by the Assessing Officer
It was observed that the appellant had not agitated the additions in the appellate proceedings and thereby it does not amount to either concealment of income or furnishing of inaccurate particulars of income.
A Coram comprising Shri Inturi Rama Rao, Accountant Member and Shri S S Viswanethra Ravi, Judicial Member found that the addition u/s 36(1)(iii) was made by the Assessing Officer because the appellant had failed to demonstrate the advances to sister concern were made for the business purpose.
Further held that “a mere making claim which is not sustainable by the law itself will not amount to furnish inaccurate particulars of income and the Assessing Officer was not justified in levy of penalty u/s 271(1)(c) of the Act. The Tribunal while allowing the appeal directed the Assessing Officer to delete the penalty of Rs.34,50,500/- levied u/s 271(1)(c) of the Act.
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