An Unlawful Claim for Deduction would not amount to ‘Concealment of Income’: ITAT deletes Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that an unlawful claim for deduction would not amount to “concealment of income” in order to impose a penalty under Section 271(1)(c) of the Income Tax Act, 1961.

The Assessee, Ms. Bandana Bahuguna along with her husband jointly purchased a flat on a total consideration of Rs.46,00,000/- and an amount of Rs.3,12,000/- as registration and stamp duty charges. The Assessing Officer asked the Assessee to explain the source of payments, in response to which, the Assessee submitted that an amount of Rs.35,00,000/- was paid by cheque and balance amount of Rs.11,00,000/- as consideration charges and Rs.3,12,000/- as registration charges and stamp duty, have been paid from accumulated cash savings, marriage gifts in cash and cash withdrawals from her own saving bank accounts and of her husband. The Assessing Officer while considering the claim of the Assessee on cash payment, accepted to the tune of Rs.3,50,000/- and Rs.2,08,000/- and added an amount of Rs.5,58,000/- as undisclosed investment u/s. 69 of the Act.

The Tribunal comprising Shri Pradip Kumar Kedia, Accountant Member and Shri N.K. Choudhry, Judicial Member observed that “it is not the case of the Revenue that the Assessee has acted deliberately in defiance of law, or is guilty of contumacious or dishonest conduct, or acts in conscious disregard of its obligation and therefore in our considered view, mere making of a claim, which is not sustainable in law, would not, ipso facto, amount to concealment of income or furnishing of inaccurate particulars regarding the income of the Assessee and would, therefore, not automatically result in a penalty order against the Assessee’.

The bench further relied on the decision of the Apex Court in the case of Reliance Petro Products Pvt. Ltd wherein it was held “Merely because the Assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.”

To Read the full text of the Order CLICK HERE

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