INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Leviability - Wrong claim for deduction - Assessee provided reasonable explanation

AO disallowed assessee's claim of deduction under section 36(1)(viii). Subsequently, he imposed penalty under section 271(1)(c) alleging that it was not a case of plausible claim based on a bona fide interpretation of law and the assessee was clearly not eligible for deduction. However, Tribunal deleted the said penalty. Held: It is settled that so long as assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c), even if the claim made by him is unsustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bona fide. In instant case, the explanation offered by assessee for claiming deduction under section 36(1)(viii) was found to be reasonable, therefore, the Tribunal was justified in deleting penalty under section 271(1)(c).

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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