The Madras High Court recently held that the penalty under section 271(1)(C) of the Income Tax Act can be levied if the department rejects the claim for deduction made by the assessee.
The Court noted that when there were two interpretations which were possible with regard to the deduction, and the claim was rejected by the department, then it cannot be said that there were concealment and furnishing of inaccurate particulars with deliberate intention, to avoid payment of tax on the part of the assessee.
In the instant case, the assessee claimed deduction under section 80IA(4)(iv) of the Income Tax Act. The Assessing Officer denied the claim. On the second appeal, the Tribunal also rejected the claim.
The department initiated penalty proceedings under section 271(1)(C) against the assessee. On appeal, the Tribunal quashed the proceedings holding that the conditions of section 271(1)(C) are not satisfied in the instant case.
The bench comprising Justice T.S.Sivagnanam and Justice V.Bhavani Subbaroyan held that “the Tribunal has considered the matter in a proper perspective, took note of the factual position and held that at the relevant point of time there were two interpretations which were possible with regard to the deduction that can be claimed under Section 80IA(4)(iv). In such circumstances, the Tribunal has rightly held that the case of the assessee cannot be brought within the ambit of concealment and furnishing of inaccurate particulars with deliberate intention, to avoid payment of tax.”
Subscribe Taxscan Premium to view the Judgment
