The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax penalty under section 271(1)(c) of the Income Tax Act, 1961 cannot be levied on ground that the assessee claimed deduction without any malafide intention.
The assessee, Shanti Chemsteel Pvt. Ltd has debited the interest charged to its OD account by the bank to its profit and loss account and claimed it as deduction. Undisputedly, while completing the assessment, Assessing Officer has allowed assessee’s claim. The first appellate authority has imposed penalty under Section 271(1)(c) of the Act, alleging furnishing of inaccurate particulars of income. The assessee approached the Tribunal for relief.
The Tribunal bench comprising Shri Saktijit Dey, Judicial Member and Dr. Brr Kumar, Accountant Member held that all material relating to the interest component was furnished before the departmental authority.
“In fact, learned Commissioner (Appeals) has found the interest on OD account from the profit and loss account of the assessee. Thus, in our considered opinion, the explanation of the assessee that it is a bona fide claim of deduction, appears to be reasonable. It is to be noted that penalty under Section 271(1)(c) of the Act is not automatic. If assessee offers reasonable explanation, then, penalty cannot be imposed. In the facts of the present appeal, in our considered opinion, the deduction claimed by the assessee is not due to any mala fide intention but on a bona fide belief. In any case of the matter, as held by the Hon’ble Supreme Court in case of CIT vs. Reliance Petro Products (322 ITR 82), disallowance of a deduction claimed by the assessee by itself cannot lead to furnishing of any inaccurate particulars of income. Applying the aforesaid legal principle, we hold that it is not a fit case for imposition of penalty under Section 271(1)(c) of the Act. Accordingly, we delete the penalty imposed,” the Tribunal said.
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