Case Law Details
Sabharwal Food Industries Pvt Ltd Vs DCIT (ITAT Delhi)
Introduction: In a notable judgement, the Income Tax Appellate Tribunal (ITAT) Delhi has ruled in favor of Sabharwal Food Industries Pvt Ltd in its case against the Deputy Commissioner of Income Tax (DCIT). The ITAT held that penalties under section 271(1)(c) of the Income Tax Act cannot be imposed simply because a claim was not accepted.
Analysis: The issue arose when the company made cash payments exceeding Rs. 20,000 on several occasions for medical expenses, a violation of section 40A(3) of the Act. Despite these payments being genuine expenses related to the treatment of employees and directors, they were disallowed by the Assessing Officer due to the mode of payment. This led to a penalty under section 271(1)(c).
The assessee appealed against the penalty, arguing that they had not concealed or inaccurately furnished any particulars of income. They justified the cash payments as necessary due to medical emergencies during odd hours when non-cash payments were not accepted.
The ITAT, after considering the evidence, ruled in favor of the assessee. Citing the Supreme Court ruling in the case of Reliance Petroproducts (P) Ltd. vs. CIT, the ITAT held that a penalty could not be levied under section 271(1)(c) merely because a claim was not accepted.
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