ITAT: Mere disallowance of expenditure can never result into penalty under Section 271(1) (c) of the IT Act

The Income Tax Appellate Tribunal (ITAT) has ruled that a mere disallowance of expenditure by the Assessing Officer does not automatically warrant a penalty under Section 271(1)(c) of the Income Tax Act. The tribunal considered a case where the Assessing Officer made disallowances for foreign travel expenses and discrepancies in reported income. However, the ITAT clarified that the penalty provisions require a higher threshold of proof, such as the furnishing of inaccurate particulars, which must be demonstrated beyond mere disallowance.

IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH “C”: NEW DELHI ]

BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

ITA No. 1252/Del/2017
(Assessment Year: 2012-13)

M/s. Jay Bee Laminations
Pvt. Ltd.,
P. No. – 5, 2nd Floor,
Prem Nagar Market,
Tyagraj Nagar,
New Delhi – 110 003.
PAN : AAACJ1868Q
(Appellant) 

Vs.

DCIT,
Circle : 13 (2),
New Delhi.
(Respondent)

Assessee by : None
Department by : Ms. Anima, Sr. D.R.;

Date of Hearing 12/07/2021
Date of pronouncement 12 /07/2021

O R D E R

PER PRASHANT MAHARISHI, A. M.

01. This appeal is filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals)–5, New Delhi, dated 16.01.2017, for assessment year 2013-14, confirming the penalty levied of Rs. 50,540/- by the Dy. Commissioner of Income Tax, Circle 13 (2) New Delhi, as per order under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) dated 28.07.2015. The assessee is aggrieved with the confirmation of the above penalty and has preferred this appeal before us. All the grounds of appeal also revolve around the solitary issue.

02. The facts of the case show that assessee is a company engaged in the business of manufacturing and job work of CRGO silicon electrical steel lamination. It filed its return of income on 27.09.2012 declaringincome of Rs.1,67,05,630/-. The case was picked up for scrutiny andassessment under Section 143(3) of the Act was passed on 31.01.2016 by the ld. Assessing Officer determining total income of Rs. 1,68,54,310/-. The ld. AO made following two disallowances. The first disallowance is on account of foreign travel expenditure of Rs.1,10,894/-. The fact shows that assessee has claimed expenditure of Rs.2,21,787/-. The assessee was asked to produce the details along with vouchers. Assessee filed the details, but did not produce the vouchers. The Assessing Officer held that there could be a possibility of some expenditure of personal nature, therefore, he disallowed 50%of the same i.e. Rs.1,10,894/-. The second disallowance is ofRs.37,787/- on account of difference in income shown in the profit and loss account and receipts declared in 26AS. The ld. AssessingOfficer found that there is a difference of Rs.22,537/- on account ofinterest from ICICI Bank and Rs.15,250/- in job work income from BHEL. Thus, the addition of Rs.37,787/- was made to the income of the assessee.

03. The ld. Assessing Officer at the time of passing assessment order recorded a satisfaction that assessee has furnished inaccurate particulars of income and, therefore, penalty under Section 271(1)(c) of the Act was initiated for submission of inaccurate particulars. The fact shows that assessee did not prefer any appeal and, therefore, penalty proceedings were proceeded with. The assessee submitted during the course of penalty proceedings that assessee has notreceived any such interest of Rs. 22,537/- from ICICI Bank and this could be because of mistake on the part of the ICICI Bank onpunching wrong Permanent account number. With respect to the job work of BHEL assessee submitted that assessee has not done any jobwork of BHEL. Assessee also submitted that there could not be any reason that assessee will do job work of Rs.15,250/- of such a big company. The ld. Assessing Officer rejected the explanation of the assessee holding that assessee did not bring anything on record; therefore, the penalty is leviable. He held that had there not been any scrutiny, these additions / disallowances could not have been made. 

To know more in details find the attachment file