2010 (2) TMI 979

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..... He filed return showing an income of Rs. 22,18,600 after claiming deductions under Chapter VIA including deduction under section 80-O of Rs. 14,12,642. During the course of assessment the assessee was asked to justify the claim of deduction under section 80-O of the Act. In response, it was submitted by the assessee vide letter dated September 22, 2005 as under (paragraph 7 of assessment order) : "Manan Enterprises extend the technical consultancy and provide information concerning industrial and commercial enterprise and renders professional services to overseas companies to help them study and evaluate the application and the requirements of Indian Market. These include providing feedback on product usage and give, feedback of the....

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...." The Assessing Officer after considering the assessee's reply while observing that the defence of ignorance of law is not acceptable, disallowed the deduction under section 80-O of Rs. 14,12,642 and added to the income of the assessee. The Assessing Officer after making some other disallowances completed the assessment at an income of Rs. 36,60,070 vide order dated November 18, 2005 passed under section 143(3) of the Act and also initiated penalty proceeding under section 271(1)(c) of the Act. In the absence of any explanation, in response to notice to show-cause as to why penalty under section 271(1)(c) may not be imposed, the Assessing Officer while observing that the assessee has admitted the mistake at the time of assessment and has....

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....s a mistake of law which has been committed on the basis of advice given by his consultant, therefore, in view of the decision in T. Ashok Pai v. CIT [2007] 292 ITR 11 (SC) the penalty is not leviable. The reliance was also placed on the decision in Union of India v. Rajasthan Spg. and Wvg. Mills [2009] 23 DTR 158 (SC) to contend that the decision in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) cannot be said to hold that the same will be applied in each case with regard to the imposition of penalty. The reliance was also placed on the decision in Glorious Realty P. Ltd. v. ITO [2009] 29 SOT 292 (Mum) and Kanbay Software India P. Ltd. v. Deputy CIT [2009] 122 TTJ 721 (Pune). He therefore, submits that the penalty....

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....e is no dispute that the assessee has made the claim of deduction under section 80-O of Rs.14,12,642 on the basis of advice given by his tax consultant. This bona fide belief of the assessee was not controverted by the Revenue even at this stage. It is also not the case of the Revenue that the assessee has not disclosed complete particulars of his income or the claim made by the assessee is not supported by tax audit reports. It is repeatedly held by the courts that when the facts are clearly disclosed in the return of income penalty cannot be levied. Merely because an amount is not allowed or taxed to income, it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Even if some deducti....