2011 (3) TMI 1790 - AT - Income Tax

Summary

Issues involved: Appeal against penalty imposed u/s 271(1)(c) of the I.T. Act.

Summary:
The appeal was filed against the penalty imposed u/s 271(1)(c) of the I.T. Act. The assessee argued that the penalty was based on a disallowance u/s 40A(2)(b) and contended that no penalty should be levied as there was no concealment of income or furnishing of inaccurate particulars. The Tribunal considered the facts and legal precedents cited by both sides and concluded that the disallowance made u/s 40A(2)(b) did not warrant the imposition of a penalty u/s 271(1)(c) as there was no concealment or inaccurate particulars furnished by the assessee. The Tribunal allowed the appeal of the assessee.

The assessee, engaged in manufacturing, disclosed nil income in its return after setting off losses. The Assessing Officer completed the assessment at nil income, but made certain disallowances. The penalty was imposed during the pendency of the appeal before the Tribunal. The Tribunal noted that the disallowance u/s 40A(2)(b) did not indicate any concealment or furnishing of inaccurate particulars by the assessee. Citing legal precedents, the Tribunal held that mere disallowance of expenses does not attract penalty u/s 271(1)(c) if there is no concealment or inaccurate particulars furnished. The Tribunal emphasized that the genuineness of the expenditure was not in question, and the Assessing Officer's discretion in making the disallowance u/s 40A(2)(b) did not warrant a penalty. The Tribunal allowed the appeal of the assessee based on these findings.

In conclusion, the Tribunal allowed the appeal of the assessee against the penalty imposed u/s 271(1)(c) of the I.T. Act. The order was pronounced in the open court in the presence of representatives of both sides.