notice u/s 271(1)(c)

[Mayank Raval]

Dear sirs.

My party has filled the return of income , comes under the scrutiny , in the matter A.O. found two points where he objected & made a addition to the matter.

Points are as under :

1. A.O. has demanded that my client has not ded. the TDS on source of the Loans taken from the Fin. Compnaies other than bank , here they have not made any TDS for the same.

2. My client has not given the effect of the cut off procedure for the expenditures to make proportion to the Prepaid Expenses in relation to the Insurance expenses and it involves Rs. 3 Lacs so here the A.O. has made the 60 % adhoc addition to the income.

Pls help me to resolve the case with some materials availabe to solve the matter.

Reagrds

Mayank 

[Rama Krishana]

Since your question is related to penalty u/s 271(1)(c), in my view, you can claim relief on the ground of banafide belief. If there is no intention to evade tax or concealment of income, no penalty under section 271(1)(c) be imposed. The addition has been made on technical grounds and the assessee has suffered for the same under different set of provisions, therefore, I hope that penalty would be waived off.

AI Summary

Bona fide belief defense can preclude penalty under section 271(1)(c) where no concealment or intent to evade is found. The assessing officer raised adjustments for non-deduction of TDS on loans from non-bank finance companies and a substantial ad hoc addition for misapplication of cutoff to prepaid insurance expenses. The key penalty issue is section 271(1)(c); where there is no deliberate concealment or intention to evade tax, a defence based on bona fide belief or reasonable cause may be relied upon to contest penalty imposition, distinguishing technical accounting or withholding errors from culpable concealment.