Penalty u/s 271(1)(c) of Income Tax Act not imposable in absence of willful concealment

Vimal Oil & Foods Ltd Vs DCIT (ITAT Ahmedabad)

ITAT Ahmedabad held that no penalty can be imposed u/s. 271(1)(c) of the Act on account of disallowance of expenses incurred for increase of authorized share capital since no penalty can be imposed when there was no willful concealment.

Facts- During the course of assessment, AO observed that the assessee had increased the authorized share capital from Rs. 23 crores to Rs. 33 crores. The assessee had incurred expenditure of Rs. 5,01,000/- in connection with increase in authorized share capital. In the assessment proceedings, AO held that such expenditure of Rs. 5,01,000/- was capital in nature and accordingly, could not be allowed to the assessee as revenue expenditure.

Accordingly, AO, after recording necessary satisfaction, proceeded to initiate penalty proceedings u/s. 271(1)(c). In the penalty proceedings u/s. 271(1)(c) of the Act, AO proceeded to impose penalty amounting to Rs. 1,50,330/- on disallowance of expenditure incurred on raising authorized share capital. The assessee filed appeal against the aforesaid order passed by the Assessing Officer imposing penalty u/s. 271(1)(c) of the Act, which was dismissed by the ld. CIT(A).

Conclusion- ITAT Mumbai in the case of Jefferris India Pvt. Ltd held that no penalty can be imposed u/s. 271(1)(c) of the Act on account of disallowance of expenses incurred for increase of authorized share capital since no penalty can be imposed when there was no willful concealment and mistake involved only a human error.

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