2011 (11) TMI 744 - AT - Income Tax

Appeal Success: Penalty Cancelled for Assessee in Income Tax Case

The appeal involved the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2007-08. The ITAT Delhi ruled in favor of ... - Issues involved: Levy of penalty u/s 271(1)(c) of the I.T. Act, 1961.Summary:The appeal by the assessee for assessment year 2007-08 was related to the levy of penalty u/s 271(1)(c) of the I.T. Act, 1961. The Assessing Officer disallowed certain expenses claimed by the assessee, leading to the imposition of a penalty equivalent to 100% of the tax sought to be evaded. The CIT(A) upheld the penalty, stating that the assessee did not voluntarily offer to add back the excess claims. However, the assessee argued that the claims were made in good faith based on legal interpretations and that no penalty was imposed in a similar situation in the past.The ITAT Delhi considered the facts and held that the assessee had disclosed all relevant information in the return of income and revised the computation after the disallowance was made for the previous assessment year. It was noted that the assessee did not make fraudulent or bogus claims but genuinely believed in the eligibility of the deductions claimed. Relying on a previous decision of the Hon'ble Delhi High Court, it was concluded that the penalty u/s 271(1)(c) was not applicable in this case. Therefore, the penalty imposed by the Assessing Officer was canceled, and the appeal filed by the assessee was allowed.This judgment highlights the importance of good faith in tax assessments and the need for clear disclosure of facts to avoid penalties under the relevant provisions of the Income Tax Act.