ITAT rules no penalty for disallowing a bonafide claim

ITAT rules no penalty for disallowing a bonafide claim

Cites the Supreme Court verdict in a similar case

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax penalty shall not be imposed for disallowance of a bonafide claim.

The assessee, Jain Peripherals Private Limited appealed before ITAT against the July 2019 order passed by the Commissioner of Income-tax (Appeals) under the Income Tax Act, 1961, for the Assessment Year 2014-15.

The assessee filed its Income Tax Return (ITR) showing Rs.32,87,521 towards capital loss, qua sale of property, constituting Shop No. LG-24, South Point Mall, Gurgaon, on consideration of Rs.1,00,00,000, which was purchased for Rs.1,32,87,521.

The assessee was asked by the assessing officer (AO) to furnish the sale and purchase deed of the property. In response, the assessee submitted that it received an advance sale price of Rs.1,10,00,000 for the said property during the Assessment Year 2013-2014. (It enclosed the ledger account of advance against property for the year ending 31 March 2013).

The assessee maintained that erroneously, in the Assessment Year 2014-2015, it mentioned Rs.1,00,00,000 as an advance against the property and transferred the difference of Rs.10,00,000 to the next year. (A ledger account of advance against property for the year ending 31 March 2014 was enclosed). It resulted in a capital loss of Rs.22,87,521 instead of Rs.32,87,521.

While considering the submissions of the assessee, the AO maintained that it failed to submit the proof/bills/vouchers of expenses incurred. He held that the expenses could not be considered as the purchase cost of the property. The AO initiated a penalty qua the addition, for filing inaccurate particulars of income.

Aggrieved by it, the assessee challenged the order before the CIT(A), who by impugned order though deleted the penalty of Rs.4778, affirmed the penalty on account of the addition of Rs.78,95,407. Left with no option, the assessee appealed before the tribunal.

ITAT observed, "The documents show that almost all relevant details may not be in the form of documents, specifically qua expenditures incurred, otherwise available before the AO for consideration. Even the Supreme Court, in the CIT(A) vs Reliance Petro Products, had held that a mere claim, which is not sustainable in law, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Hence, such a claim made in the ITR cannot amount to inaccurate particulars."

It added. "We consider the peculiar facts and circumstances that the assessee had already closed its business, and, therefore, could not file the part documents as required by the AO. However, from the documents produced, the details of the purchase price/value of the property were available before the authorities."

The bench further stated, "The claim made by the assessee are bonafide and cannot be termed as dishonest or mala fide. Hence, no penalty is leviable. We do not find any material/reason or justification for levying a penalty. Consequently, the penalty under challenge is deleted."