Penalty not imposable for bonafide claims which gets disallowed

Penalty u/s 271(1)(c ) shall not be imposed if assessee has set off  loss against the amount of profit after claiming deduction under Section 80HHC of the said Act.

In view of Supreme Court judgment in the case of IPCA Laboratory Ltd. v. DCIT : [2004] 266 ITR 521 (SC), wherein the Supreme Court held that the provisions of section 80AB had an overriding effect over all the other sections in Chapter VI-A including Section 80HHC. The decision in IPCA Laboratory Ltd (supra) came subsequent to the filing of the return. Therefore, it cannot be said that the claim made by the respondent /assessee was not bona fide or without any basis. The present case is not covered by the ratio laid down in Zoom Communication Private Limited: 327 ITR 510 (Del). The Tribunal has arrived at the correct decision relying upon the decision of the Supreme Court in Reliance Petroproducts Private Limited: 322 ITR 158 (SC).

HIGH COURT OF DELHI

Judgment delivered on: 27.02.2013

Appeal No. ITA 47/2013

COMMISSIONER OF INCOME TAX, DELHI

versus

MADHUSHREE GUPTA

JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

Delhi HC upholds deduction claim under Section 80HHC, dismissing penalty. Ruling based on Supreme Court decisions. Full analysis of ITA 47/2013 judgment.

1. This appeal is directed against the Tribunal’s order dated 25.05.2012 in ITA No. 1589/Del/2005 pertaining to the assessment year 2001-02. It arises out of the penalty order passed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961. A penalty of 18,79,303/- had been imposed upon the respondent. The Commissioner of Income Tax (Appeals) confirmed the penalty, which had been deleted by the Tribunal by virtue of the impugned order.