The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the penalty under section 271(1)(c) of the Income Tax Act, 1961 will not attract merely because the assessee claimed expenditure under a different head of income.
The income tax return filed by the assessee was rejected by the Assessing Officer by holding that the expenses were claimed under a different head of income. Subsequently, the Assessing Officer initiated penalty proceedings on the ground of rejection of such a claim.
Before the Tribunal, the assessee claimed that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings.
However, the department, on the other hand, argued that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings.
Deleting the penalty order, the Tribunal observed that since the inappropriate words in the penalty notice have not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) cannot be initiated.
“Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down by the Hon’ble High Court in case of M/s. Sahara India Life Insurance Company Ltd. (supra) will be applicable in the present case,” the Tribunal said.
“The notice under Section 271(1)(c) r.w.s. 274 of the Act itself is bad in law. The CIT(A) relying upon the decision of the Hon’ble Apex Court in case of CIT vs. Reliance Petro Products Pvt. Ld. 322 ITR 328 (SC) held that it is not the Assessing Officer’s case that the details supplied in the return are inaccurate. Merely because the assessee claimed the expenditure by virtue of a change of head of income and the claim was not acceptable to the Assessing Officer cannot per se attract penalty u/s 271(1)(c) of the Act,” the Tribunal added.Subscribe Taxscan AdFree to view the Judgment