2015 (2) TMI 1209 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance made u/s. 94(7) - Held that - As decided in the case of City Group Global Markets India Pvt. Ltd. 2011 (12) TMI 658 - ITAT MUMBAI since no malafide intention can be attributed to assessee in claiming loss in these transactions, we are of the view that penalty under section 271(1)(C) is not warranted. Various case law relied upon by the assessee also supports the contentions made. However, without getting into the legal parameters, on facts of the case we are of the view that there occurred a bonafide mistake in not examining the provisions of section 94(7) on these transactions. Moreover, though there are disallowances in the course of the assessment proceedings, mere disallowance does not attract penalty proceedings under section 271(1)(C). - Decided in favour of assessee

Summary

Issues:
- Appellant appealing against penalty levied under section 271(1)(c) of the Income Tax Act on disallowance made under section 94(7) for assessment years 2009-10 and 2007-08.

Analysis:
- The Appellant's appeals were against the penalty imposed by the Ld. CIT(A) under section 271(1)(c) of the Income Tax Act for disallowances made under section 94(7) for the assessment years 2009-10 and 2007-08. The disallowed amounts were Rs. 16,40,149/- for A.Y. 2007-08 and Rs. 14,33,110/- for A.Y. 2009-10, based on dividend stripping provisions. The Ld. CIT(A) confirmed the penalties in both cases.

- The Appellant argued that in a previous case for A.Y. 2006-07, the Tribunal had deleted a similar penalty. The Ld. Departmental Representative failed to provide any favorable decision for the Revenue. The Tribunal reviewed the orders and the previous decision in the A.Y. 2006-07 case.

- The Tribunal referred to a case involving City Group Global Markets India Pvt. Ltd. and Ramesh Damani, where penalties were not imposed for similar inadvertent errors in disallowances under section 94(7). The Tribunal found no merit in the penalties imposed by the AO under section 271(1)(c) for the disallowances made under section 94(7) in the present case.

- Citing the precedent set by the Co-ordinate Bench and following the decisions in similar cases, the Tribunal set aside the Ld. CIT(A)'s orders for both years and directed the AO to delete the penalties imposed under section 271(1)(c) of the Act. Consequently, the appeals by the assessee were allowed.

- The judgment was pronounced in the Open Court on 26th February 2015, with the Tribunal ruling in favor of the appellant by overturning the penalties imposed by the Ld. CIT(A) for the disallowances made under section 94(7) in the respective assessment years.