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

Penalty under 271(1)(c) inapplicable to additions under 40A(2)(b) for excess interest to relative where no concealment. Addition for excess interest paid to a relative was treated under Section 40A(2)(b) as a disallowance for related party interest; a penalty under Section 271(1)(c) was held inapplicable because the adjustment stemmed from an allowability issue rather than concealment or inaccurate particulars.