The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that mere wrong claim by itself would not ipso facto invite the imposition of penalty under Section 271(1)(c) of the Income Tax Act 1961, if bona fides of assessee’s actions were beyond the reasonable doubt.
The assessee, Sarva Haryana Gramin Bank was a rural bank run by the professional management. The Revenue had challenged the reversal of penalty by the Commissioner of Income Tax Appeals (CIT(A)) imposed under Section 271(1)(c) of the Income Tax Act by the Assessing Officer.
Vivek Gupta, on behalf of the revenue pointed out that impugned penalty under Section 271(1)(c) of the Income Tax Act had raised from disallowance under Section 14A of Income Tax Act read with Rule 8D of the Income Tax Rules, disallowance of deduction of in respect of amortisation of premium paid at the time of purchase of securities over the remaining period of securities and disallowance on account of loss on sale of obsolete stationery and other petty items.
Anuj Garg, on behalf of the revenue submitted that the first two issues had been adjudicated in favour of the assessee and the quantum addition itself had been deleted. As regards third issue, the claim towards loss on account of obsolete stationery had aroused owing to the fact that erstwhile Gurgaon Gramin Bank and erstwhile Haryana Gramin Bank were amalgamated into a single bank namely, the assessee herein.
He further submitted that as a consequence, the printed stationery in the name of erstwhile bank became obsolete and the management of the bank decided to dispose of such unusable stock of stationery and the resultant losses were booked in the ordinary course of business. imposition of penalty under Section 271(1)(c) of the Income Tax Act was highly unjustified and undeserving.
The two-member Bench of Saktijit Dey, (Vice President) and Pradip Kumar Kedia, (Accountant Member) observed that the imposition of penalty had flown from the additions/disallowances as listed in the preceding paragraph. Two of such disallowances/additions stood deleted in the quantum proceedings and therefore, the very basis for imposition of penalty would not survive any more.
The Bench observed that the amalgamation had taken place resulting in the stationery becoming unusable and obsolete and bona fides of the losses claimed were sufficiently proved and onus that lay upon the assessee had been primarily discharged on the parameters of penalty proceedings.
The Bench dismissed the appeal filed by the revenue holding that it was well settled that a mere wrong claim by itself would not, ipso facto, invite imposition of penalty under Section 271(1)(c) of the Income Tax Act where the bona fides of the action of the assessee were beyond reasonable doubt.
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