Small Industries Development Bank of India Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal, Mumbai, adjudicated appeals challenging penalty orders imposed under Section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2014–15 and 2015–16. The penalties arose from disallowance of a claim relating to proportionate amortisation of lease premium paid to the Mumbai Metropolitan Regional Development Authority, which was treated as capital expenditure during assessment proceedings. The Assessing Officer levied penalty on the disallowance, and the Commissioner of Income Tax (Appeals) upheld the same.
The assessee contended that the penalty was unjustified as the issue of allowability of lease premium as revenue expenditure had already been admitted as a substantial question of law by the jurisdictional High Court in earlier years. It was argued that this demonstrated the debatable nature of the issue and the bona fide of the claim.
The Tribunal examined the record and noted that the High Court had admitted the question of whether lease premium constituted revenue expenditure eligible for deduction. It observed that when a substantial question of law is admitted, the issue becomes debatable, and therefore, penalty for concealment or furnishing inaccurate particulars cannot be sustained.
Relying on judicial precedents, including decisions of High Courts and the Supreme Court, the Tribunal reiterated that penalty is not automatic and cannot be levied merely because a claim is disallowed. It emphasized that unless the claim is found to be false or inaccurate, the mere making of an unsustainable claim does not attract penalty.
