AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1658
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....ng deduction under section 80P. The assessee has maintained regular books of accounts, which were duly audited under section 44AB of the IT Act, 1961 and audit report in Form No. 3CA & 3CD were furnished. The case of the assessee was selected for scrutiny and notice under section 143(2) of the IT Act, 1961 was issued on 04.09.2014. Notices under section 142(1) along with questionnaire were issued on 18.02.2015 and 03.08.2015. In response to the notices, the assessee furnished the Books of account, bank statements and other details as required by the AO. Thereafter, the AO completed the assessment under section 143(3) on 29.02.2016 at a total income of Rs. 1,30,280/- by disallowing the deduction under section 80P in respect to the interest on advances given to staff amounting to Rs. 30,05,845/- and miscellaneous income of Rs. 12,255/- (total of both taxable after proportionate deduction of expenses Rs. 1,30,280) on the ground that granting of advance to staff cannot be considered imperative to the business of the society. Simultaneously, the AO initiated penalty proceedings under section 271(1)(c) of the IT Act, 1961. In response to the notice issued by the AO on 19.02.2019, the ass....
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....of the assessee. It is to mention that no concealment was made on the part of the assessee as everything has been properly disclosed in the computation and it is a legal dispute. Penalty under section 271(1)(c) can only be imposed if there is concealment of income or furnishing of inaccurate particulars of income by the assessee. Mere legal findings or differences of opinion on interpretation of law do not justify imposition of penalty. The assessee has acted in good faith and disclosed all material facts necessary for assessment. The disallowance of the claim in the assessment proceedings could not be the sole basis for levying penalty under section 271(1)(c) of the Act. There was no mala fide intention to evade tax. The word "particulars" used in the section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in various cases that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. In this regard, the observat....
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.... Perinchery (2017) 392 ITR 4 (Bombay) The Bombay High Court ruled that where the assessee had disclosed all facts material for computation of income, the mere fact that such a claim was not acceptable would not justify imposition of penalty for furnishing inaccurate particulars. The court stressed on the difference between "making an incorrect claim" and furnishing inaccurate particulars." CIT v. Atul Mohan Bindal (2009) 317 ITR 1 (SC) The Supreme Court held that where there is no finding that any details supplied by the assessee in its return were incorrect or erroneous or false, there is no question of imposing penalty. CIT v. Smt. P.K. Noorjahan(1999) 237 ITR 570 (SC) The Supreme Court held that where the question of law was debatable, penalty cannot be imposed. In the light of the above arguments and case laws, it is respectfully submitted that the penalty imposed under section 271(1)(c) is not justified and should be deleted. The assessee has not concealed any income or furnished inaccurate particulars. The penalty has been imposed merely based on legal findings and issuance of a High Court order. Therefore, it is prayed that the Hon'ble ITAT may be pleased to d....
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....tation filed by the assessee, we find no fault in the particulars submitted by the assessee. Before the AO, the assessee has already submitted that in the computation of the aforesaid assessment year, it is clearly mentioned that the treatment on interest on advances to staff is a disputed matter and the assessee has not considered the same as income." The assessee has also provided the Assessing Officer with the Balance Sheet and Profit & Loss account during the assessment proceedings. The interest on advances to staffs was clearly reflected in the Profit & Loss account. On perusal of the above details, we are of the view that the AO was not justified in observing that assessee has concealed income or furnished inaccurate particulars of income and levying penalty under section 271(1)(c) of the IT Act, 1961. 7.2 We rely on the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC), wherein the Hon'ble Supreme Court has held as under: "10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate ....
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....was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature. 13. In this behalf the observations of this court made in Sree Krishna Electricals v. State of Tamil Nadu [2009] 23 VST 249 as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings under the Tamil Nadu General Sales tax Act, the court had found that the authorities below had found that there were some incorrect statements made in the return. However, the said transactions were reflected in the accounts of the assessee. This court, therefore, observed (page 251) : "So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant's account books. Where certain items which are not included in the turnover are disclosed in the dealer's own account books and the assessing ....