INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - Whether mere denial of assessee's claim attract penalty -

Assessee was Foreign Institutional Investor registered with the SEBI. It was a tax Resident of Switzerland and claimed benefit under DTAA. AO disallowed underwriting commission by treating it as business income. CIT(A), however treated the underwriting commission claimed by assessee as non-taxable, as FTS and held the same to be taxable in India. AO levied penalty under section 271(1)(c), but that was deleted by CIT(A). Assessee contended that penalty proceedings were initiated by the AO on treating Underwriting Commission as business income which was changed to 'fees for technical services by the CIT(A) and hence penalty under section 271(1)(c) was not attracted under that set of circumstances. Held: In the instant case assessee had filed the true nature of income, i.e., underwriting commission and claimed the same as not taxable but its said claim was not accepted by the Revenue. And, according to section 271(1)(c), mere disallowance of a claim made by the assessee in return of income cannot lead to a conclusion that the assessee was guilty of concealment or filing inaccurate particulars of income. Thus, penalty under section 271(1)(c) could not be levied as assessee had filed the true nature of underwriting commission.

REFERRED : CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) : 2010 TaxPub(DT) 1683 (SC),CIT v. Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 (Del) : 2010 TaxPub(DT) 1957 (Del-HC)

FAVOUR : In assessee's favour

A.Y. : 2008-09

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