Usha Dilipbhai Shah Vs ITO (ITAT Ahmedabad)
In this case, the ITAT Ahmedabad held that penalty u/s 271(1)(c) cannot be levied merely because the assessee made an incorrect claim, particularly when all facts were duly disclosed.
The Tribunal noted that:
- The addition was made treating loan as deemed dividend u/s 2(22)(e),
- However, the assessee had already disclosed the transaction in audited books,
- The difference arose only due to interpretation/treatment of income, and not due to concealment.
The ITAT held that:
- Wrong claim ≠ concealment or furnishing inaccurate particulars,
- When details are fully disclosed, penalty cannot be justified, and
- There was no intention to hide income.
Accordingly:
- Penalty u/s 271(1)(c) was deleted, and
- Assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed against the order dated 21-11-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2014-15.
2. The grounds of appeal are as under:-
“1. The learned C1T(A) erred in law and on facts in confirming the penalty of Rs. 2,56,940/ – levied by the AO under section 271(1)(c) of the Act.
2. The learned C1T(A) erred in law and on facts in confirming the action of the JAO in passing the order, which was without jurisdiction, thus not enforceable
Total tax effect Rs.2,56,940/-“
3. Return of income was filed by the appellant on 30.07.2014, declaring total income of Rs.3,74,757/- for A.Y. 2014-15. As per information available with the Department, the appellant was a beneficial owner of shares holding not less than 10% of the voting power in M/s Saurashtra Travels Limited during the relevant financial year. Further, as per information, in the books of account of M/s Saurashtra Travels Limited, there was outstanding debit balance of Rs. 10,75,000/- of unsecured loan in the name of “SITC-Loan Account” (Sourashtra International Travel Corporation)” Prop. Smt. Ushaben Dilipbhai Shah on 23.09.2013 i.e. during the F.Y. 2013-14 relevant to A.Y. 201415. Accordingly, the proceedings u/s 147 of the Act was initiated and notice u/s 148 of the Act was issued on 30.03.2021 with prior approval of the competent authority. In response to the said notice, the appellant filed her return of income declaring total income of Rs.3,74,760/- on 31.05.2021. During the course of proceedings, the notice u/s 142(1) of the Act along with detailed questionnaires were issued to the appellant on 17.12.2021, 07.01.2022, 18.01.2022 and 31.01.2022. The show cause notice was issued on 01.03.2022. However, the appellant did not respond to these notices and remained non-compliant during the assessment proceedings. Finally, the assessment was completed on 11.03.2022 u/s 147 r.w.s. 144 of the Act at total income of Rs. 14,49,757/-, making addition of Rs. 10,75,000/-as deemed dividend u/s 2(22)(e) of the Act, raising demand of Rs. 5,707/-. Penalty proceedings u/s 271(1)(c) was also initiated while passing the assessment order. Vide penalty order dated 27.09.2022, the Assessing Officer levied penalty of Rs. 2,56,940/- u/s 271(1)(c) of the Act on concealed income of Rs. 10,75,000/-.
