INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Concealment or furnishing of inaccurate particulars - Leviability as regards disallowance made due to subsequent decision of Supreme Court -

Assessee claimed deduction of provision for bad and doubtful debts created under norms of Non-banking Financial Companies Prudential Norms (RBI) Directives, 1998 issued by RBI. Matter was decided against assessee by Tribunal in quantum proceedings in view of subseqent decision rendered by Supreme Court on the matter. Accordingly, AO levied penalty under section 271(1)(c).Held: Return of income was filed on 31-10-2002 and at that time, assessee had made a claim on the basis of ITAT, Special Bench decision and also disclosed the reason for making such a claim in return of income. Hence, it could not be said that at that point of time, assessee's claim was not bona fide or was not substantiated. It was in the year January, 2010 that Supreme Court clarified that such a provision for bad and doubtful debts even as per RBI guidelines cannot be allowed in terms of provision of the Act. Thus, it could not be held that assessee had furnished any inaccurate particulars of income at the time of filing of return of income or had not substantiated its claim and mere disallowance due to subsequent decision of Supreme Court could not lead to levy of penalty under section 271(1)(c).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2002-2003

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