DCIT Vs Manipal Hospitals (Bangalore) Private Limited (ITAT Bangalore)
2ITAT Bangalore Confirms Deletion of Penalty for Mere Disallowance of Claim: Procedural Lapse in Notice Proves Fatal to Revenue
Assessee claimed ₹2.15 crores as interest expenditure, treated by AO as pre-operative capital expenditure, and disallowed. Penalty was levied under Section 271(1)(c) on the ground of furnishing inaccurate particulars of income. CIT(A) deleted the penalty citing procedural defects and lack of intent to conceal income.
Tribunal noted that the procedural Defect in Notice as the AO failed to record clear satisfaction in the assessment order for initiating penalty. Penalty notice did not specify the correct limb of Section 271(1)(c) (concealment vs. inaccurate particulars), violating principles laid down in CIT v. Manjunatha Cotton & Ginning Factory (35 taxmann.com 250) & CIT v. SSA’s Emerald Meadows (73 taxmann.com 241)
On merits Tribunal found that the disallowance was due to difference in opinion (revenue vs. capital nature of expenditure). Following CIT v. Reliance Petroproducts (P) Ltd. (189 Taxman 322), the Tribunal held no penalty is leviable for a disallowed claim made in good faith.
Dismissing Revenue’s appeal, Tribunal held that the penalty was rightly deleted by CIT(A) both on procedural grounds and on merits.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
