Penalty under Section 271(1)(c) set aside as no concealment found in disallowing deduction under Section 80P

ITAT Jaipur held that the AO was not justified in levying penalty u/s 271(1)(c) for disallowing deduction u/s 80P related to interest on staff advances and miscellaneous income. The assessee had disclosed the disputed nature of the interest income in the return and provided relevant financial statements during assessment. The Tribunal found no concealment or inaccurate particulars of income, relying on precedent that mere wrong claims do not amount to furnishing inaccurate particulars absent false or incorrect information. The penalty was therefore set aside and the assessee's appeal allowed.

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ISSUES:

Whether penalty under section 271(1)(c) of the Income Tax Act, 1961 can be imposed for disallowance of deduction claimed under section 80P on interest income from advances to staff and miscellaneous income'Whether furnishing of particulars in the return that are disputed but disclosed in good faith amounts to concealment of income or furnishing inaccurate particulars under section 271(1)(c)?Whether a mere legal difference of opinion or a claim not sustainable in law attracts penalty under section 271(1)(c)?

RULINGS / HOLDINGS:

The penalty under section 271(1)(c) cannot be imposed merely because the deduction under section 80P was disallowed on interest income from advances to staff and miscellaneous income, as these were disclosed and treated as a disputed matter by the assessee.The assessee did not conceal income nor furnished inaccurate particulars since the interest income was reflected in the Profit & Loss account and balance sheet submitted during assessment, and the return and computation clearly disclosed the disputed nature of the claim.A mere making of a claim which is not sustainable in law does not amount to furnishing inaccurate particulars of income; penalty under section 271(1)(c) requires a finding of concealment or furnishing of incorrect or false particulars, which was absent in this case.

RATIONALE:

The Court applied the legal framework under section 271(1)(c) of the Income Tax Act, 1961, which mandates penalty only where there is concealment of income or furnishing of inaccurate particulars.Reliance was placed on the Supreme Court precedent holding that "mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income," and that no penalty can be imposed if the return particulars are not found to be incorrect or false.The Court distinguished between "making an incorrect claim" and "furnishing inaccurate particulars," emphasizing that the latter requires a conscious act or omission to evade tax, which was not present.Judicial precedents cited include rulings that where disputed items are disclosed in accounts and returns, penalty cannot be imposed merely because the claim is disallowed by the assessing authority.The Court noted that the assessee acted in good faith and disclosed all material facts, and that the disallowance of deduction under section 80P was a legal issue rather than concealment.No dissent or doctrinal shift was indicated; the decision aligns with established Supreme Court jurisprudence on penalty under section 271(1)(c).

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