Penalty under Section 271(1)(c) not justified when assessee voluntarily withdrew incorrect deductions before reassessment notice

ITAT Mumbai held that penalty u/s 271(1)(c) for concealment of income was not justified where assessee voluntarily withdrew incorrect deductions u/s 80GGA and 35(1)(ii) and paid necessary taxes before issuance of notice u/s 148. The assessee had initially claimed deduction for donation to Navjeevan Charitable Trust which was later found providing bogus accommodation entries, and weighted deduction for donations to Rural Development Society. Since assessee voluntarily offered these deductions to tax before reassessment proceedings commenced, there was no concealment of income warranting penalty. Appeals decided in favour of assessee.

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Issues involved: The judgment involves challenges to the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2014-15 and 2016-17, arising from impugned orders passed by the Commissioner of Income Tax (Appeals).

Issue 1: Assessment Year 2014-15

The assessee challenged the penalty under section 271(1)(c) of the Act, related to a donation made to Navjeevan Charitable Trust. The assessee voluntarily offered the sum claimed as deduction to tax before the notice u/s 148 of the Act was issued. The assessee withdrew the claim of deduction and paid the necessary taxes before the initiation of proceedings under section 147 of the Act. The Tribunal found no concealment of income and deleted the penalty, as the assessee had rectified the claim before the notice was issued.

Issue 2: Assessment Year 2016-17

Similarly, in this appeal, the dispute was against the penalty under section 271(1)(c) of the Act, related to a donation made to Rural Development Society. The assessee withdrew the claim of weighted deduction and paid the necessary taxes before the notice u/s 148 of the Act was issued. The Tribunal found no basis for the levy of penalty, as the assessee rectified the claim before the notice was issued, and deleted the penalty. The grounds raised by the assessee were allowed, and the appeal for the assessment year 2016-17 was allowed.

Conclusion:

In both appeals, the Tribunal allowed the challenges against the penalty under section 271(1)(c) of the Act for the assessment years 2014-15 and 2016-17. The Tribunal found that the assessee had rectified the claims and paid the necessary taxes before the initiation of proceedings, leading to the deletion of the penalties.

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