Penalty cannot be imposed merely because AO did not allow claim of Assessee

Advocate Akhilesh Kumar Sah

Merely the claim of deduction did not find favour of the AO would not justify imposition of penalty under section 271(1)(c): Aristo Pharma case

Recently, in Aristo Pharmaceuticals Pvt. Ltd. vs. ACIT [ITA No.6680/Mum/2012 with ITA No.5553/Mum/2014 and ITA No.5479/Mum/2015, A.Y.: 2009-10, 2011-12 & 2012-13, decided on 26.07.2018], briefly stated, the assessee-company was engaged in the business of manufacturing and sale of pharmaceuticals products filed its return of income for A.Y. 2005-06 on 31.10.2005, declaring income at Rs. 81,16,05,080/-. The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2) of  the Income Tax Act, 1961 (for short ‘the Act’).

The assessee in its return of income had claimed deduction under Sec. 80IB of Rs. 16,18,40,947/- on account of a new industrial undertaking located at Daman. The deduction claimed by the assessee was to the extent of 30% of the profits of the said unit. The AO while framing the assessment, being of the considered view that the deduction under Sec. 80IB was to be worked out on the basis of the profit and gains “derived from” an eligible industrial undertaking, thus declined to allow the said deduction in respect of certain other incomes aggregating to Rs. 5,87,993/- viz.

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