Advocate Akhilesh Kumar Sah
Where claim of deduction had came up with a complete disclosure of all the facts by way of a note to the Computation of Income (COI) filed with assessee’s Return of Income (ROI) for the year under consideration, no penalty under section 271(1)(c) was called for :Novartis India case
Many cases are, still, emerging out in respect of section 271(1)(c ) of the Income Tax Act, 1961 (for short ‘Act’) while a lot of appeals have been decided. Very recently, in ACIT vs. Novartis India Pvt. [ITA No. 4254/Mum/2016 and C.O. No. 246/Mum/2018 (Arising out of ITA No.4254/Mum/2016) (AY: 1992-93), decided on 26.10.2018], one of the issue was regarding the levy of penalty under section 271(1)(c) of the Act on the disallowance of Rs.1,55,442/- i.e 2% on tax free dividend income, which was made by the Assessing Officer(AO) vide his order passed under section 143(3) read with section 254 of the Act, dated 28.08.2013. The learned Members of the ITAT, Mumbai observed that the levy of penalty by the AO in context of the disallowance of Rs. 1,55,442/- is not barred by limitation. The learned Members found that the disallowance of 2% of dividend income on account of administrative and overhead expenses was originally done by the AO at over 6%, but the same was thereafter in the quantum appeal brought down by the CIT(A) to 2%. Subsequently, the said issue was restored by the Tribunal to the file of the AO to decide the same afresh. The AO in the ‘set aside’ assessment framed under section 143(3) read with section 254 of the Act, dated 28.08.2013, upheld the disallowance to the extent of 2%. The learned Members perused the order of the CIT(A), and found that it was observed by him that as the assessee while raising the said claim of deduction had came up with a complete disclosure of all the facts by way of a ‘note’ to the computation of income filed with its ‘return of income’ for the year under consideration, thus no penalty under section 271(1)(c) was called for in its hands to the said extent. The learned Members deliberated at length on the issue under consideration, and were persuaded to subscribe to the view taken by the CIT(A). The learned Members were of the considered view that now when the assessee had made a complete disclosure of all the facts in context of its aforesaid claim of deduction, thus merely because the same did not find favour with the AO, no penalty under section 271(1)(c) could have been imposed on the assessee on the said count. The learned Members found that their aforesaid view was fortified by the judgment of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC). The learned Members of the ITAT upheld the order of the CIT(A) deleting the penalty imposed by the AO in respect of the aforesaid disallowance of Rs. 1,55,442/-.