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Issues involved: Validity of penalty imposed u/s 271(1)(c) of the Income-tax Act, 1961 for assessment years 2004-05 and 2005-06.
The Appellate Tribunal ITAT Hyderabad, in the case involving the validity of the penalty imposed u/s 271(1)(c) of the Income-tax Act, 1961 for the assessment years 2004-05 and 2005-06, addressed the identical issue in both appeals by the assessee. The main contention was the disallowance of interest in the computation of income, with the assessee arguing that no penalty should be levied as all material facts were disclosed in the filed returns of income. The Revenue, however, contended that the assessee wrongly claimed deduction of interest for non-business purposes. The Tribunal noted that all material facts were disclosed by the assessee, and there was no evidence to suggest concealment of income or filing of inaccurate particulars. It was deemed a case of honest difference of opinion rather than deliberate misrepresentation, leading to the cancellation of the penalty under section 271(1)(c) for both assessment years. In the detailed analysis, the Tribunal observed that the disallowance of deduction claimed by the assessee was based on disclosed material facts in the return of income. The withdrawals made were transparently recorded, and there was no indication that the disallowance of interest was an attempt to conceal income. The Tribunal emphasized that the disagreement between the assessee and the Revenue regarding the allowance of expenses did not amount to deliberate misrepresentation. It was concluded that the assessee's explanation had a valid basis, and the case did not warrant the imposition of a penalty u/s 271(1)(c) of the Act. Consequently, the penalty was canceled, and the appeals of the assessee for both assessment years were allowed by the Tribunal. Separate Judgment: None
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