INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Validity - Assessee allegedly not carrying out any business activity - Not earning income during relevant year, whether to be construed as having no business activity

Assessee company took a loan against property and paid interest thereon. Assessee capitalized said expenditure up to date of acquisition but in return of income said interest was claimed as deduction. Since assessee was not carrying on any business activity, AO disallowed expenses and also imposed penalty under section 271(1)(c). Held: AO alleged that assessee company was not carrying on any business activity during relevant year as well as in earlier years, therefore, expenses claimed by it were not allowed by AO and were added to income of assessee. That did not amount to furnishing of inaccurate particulars of income or concealment of income as envisaged in section 271(1)(c). Assessee explained that its business activity was investment in real estate business and same constituted business activity. AO as well as CIT(A) only proceeded on basis that there was no income during year, therefore, there was no business activity, but same was fallacy and could not be taken as basis for imposing penalty.

Distinguished:CIT v. Zoom Communication Pvt Ltd 2010 TaxPub(DT) 1957 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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