2016 (1) TMI 399 - AT - Income Tax

Penalty u/s 271(1) (c) - deduction u/s 80 denied - Held that - The assessee attempted to correct the mistake by filing re- revised return. In the totality of circumstances of this case, the Appellate Authorities cannot be faulted in not finding it to be a case of making a willfully wrong claim by furnishing inaccurate particulars - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty u/s 271(1)(c) of the Income Tax Act of Rs. 1,54,49,290.

Detailed Analysis:

Issue 1: Assessment Year and Eligibility for Deduction
- The assessee, a cooperative bank, claimed deduction u/s 80P of Rs. 3,36,68,582 for the impugned assessment year.
- Due to an amendment, the deduction was restricted to specific entities from AY 2007-08 onwards, rendering the assessee ineligible.
- The AO issued a show cause notice for disallowance, leading to the withdrawal of the claim by the assessee.

Issue 2: Penalty Proceedings
- The AO initiated penalty proceedings u/s 271(1)(c) citing the erroneous claim by the assessee.
- The assessee contended that the claim was made under a bona fide error and not with mala fide intent.
- The CIT(A) upheld the penalty, stating that the claim was incorrect and lacked bona fide intentions.

Issue 3: Appellate Tribunal's Analysis
- The Appellate Tribunal noted that the incorrect claim was a result of a bonafide mistake due to a change in law.
- Comparing the case with a similar one from AY 2008-09, where the penalty was dropped by the AO for a bonafide mistake, the Tribunal found the penalty unjustified.
- Citing the decision of the Rajasthan High Court, the Tribunal emphasized that a bonafide mistake does not warrant penalty under section 271(1)(c).

Conclusion:
- The Tribunal, following the precedent and the acceptance of bonafide explanation in a similar case, deleted the penalty of Rs. 1,54,49,290 imposed under section 271(1)(c).
- The decision was based on the principle that a genuine mistake, promptly rectified, does not constitute grounds for penalty under the Income Tax Act.
- The appeal of the assessee against the penalty was allowed, and the order of the CIT(A) was reversed in favor of the assessee.