Penalty

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Sanchit Jain (Querist)
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26 March 2010 Can penalty under section 271(1)(c) be levied on ad-hoc disallowance of expenses like telephone, travelling expenses on account of personal use? Please explain with judicial support.

Amit Bajaj

Amit Bajaj (Expert)
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26 March 2010 No penalty can be levied for disallowance of expenses for personal use. Dont have the ready refernce of any case law to provide the same immidiately but Penalty u/s 271(1)(c) is levied only when there is concealment of Income and in the above case no concealment of income can be esteblished.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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26 March 2010 Two land mark cases.
1) Dilip. N. Shroff Vs. JCIT (2007) 291 ITR 519 (SC).Penalty cannot be levied.
2) UOI Vs. Dharmendra Textiles processors (2008) 306 ITR 277(SC). Penalty can be levied since mens rea is not required.

Amit Bajaj

Amit Bajaj (Expert)
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26 March 2010 The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.

Held in the latest case
CIT vs. Reliance Petroproducts (Supreme Court)