Penalty on addition of 40A(b)

[geetha menon]

The A.O. has  made addtion u/s. 40A(b) on account  excess interest payment to relative (18%-12%= 6%. Penalty u/s. 271(1)(c) can levy  on the above addition

[CAGOPALJI AGRAWAL]

I think you are talking abt 40(2)(b) provisions. Penalty can not be levied as it is neither inacccurate particulars nor concealment case.

It has also been held in the case of

Jhavar Properties (P) Limited. Versus Assistant Commissioner Of Income-Tax.

The case details is available at the following link:

https://www.taxtmi.com/caselaws?id=59637

AI Summary

No penalty under Section 271(1)(c) for excess interest under Section 40(2)(b); no inaccurate particulars involved. A user inquired about a penalty under Section 271(1)(c) related to an addition made by the Assessing Officer under Section 40A(b) for excess interest payment to a relative. The reply clarified that the user might be referring to Section 40(2)(b) and stated that a penalty cannot be levied as it does not involve inaccurate particulars or concealment. A reference was made to a case involving Jhavar Properties (P) Limited versus the Assistant Commissioner of Income-Tax, supporting the view that such a penalty is not applicable.