2012 (4) TMI 747 - HC - Income Tax

Summary

Issues involved: Appeal u/s 260A of the Income Tax Act against deletion of penalty u/s 271(1)(c) for claiming expenditure under section 37 overlooking section 14A.

Summary:
The Gujarat High Court dismissed the appeal filed by the Revenue against the deletion of penalty imposed on the assessee for claiming certain expenditure under section 37 of the Income Tax Act without considering the newly inserted provisions of section 14A. The Tribunal, following the decision in CIT vs. RELIANCE PETROPRODUCTS (P) LTD, held that since there was no incorrect information or concealment, the penalty was not justified. The main issue was whether an assessee making an untenable claim due to a new provision, without incorrect statements or concealment, should be liable for penalty u/s 271(1)(c). The Court held that if there is no incorrect information or suppression of material, and the claim is only untenable due to a prohibition in the Act, penalty cannot be imposed. Imposing penalty for an untenable claim would discourage assessees from raising new questions, fearing penalty if the claim is deemed untenable. The appeal was dismissed as it lacked merit.