INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Disallowance of deduction under section 80P(2)(d) on interest income earned from deposit with Co-operative Societies - Bona fide claim or not -

Assessee claimed deduction under section 80P. During assessment proceedings, AO noticed that the assessee earned interest on FDR from the Co-operative Banks and also from other banks. AO observed that the interest earned by assessee from other Commercial Banks was not eligible for deduction under section 80P(2)(d). AO, therefore, disallowed the deduction claimed in respect of the interest earned from FDR with other Commercial Banks, however, while making the addition he gave benefit of expenditure relatable to such interest income and the disallowance/addition was restricted to 65% of the interest income from other banks. AO also initiated penalty proceedings under section 271(1)(c) and imposed penalty. Held: Assessee in this case had put a bona fide claim under a mistaken belief that assessee was entitled to claim deduction on interest earned from FDR. There was no effort by assessee to conceal any income or to furnish any inaccurate particulars of income. Assessee has also relied in this respect on the decision of the Tribunal in case of Asstt. CIT v. Punjab State Federation of Cooperative House Building Society Ltd. [ITA No. 1010/Chd/2012, dt. 18-12-2012] where in somewhat similar circumstances, Tribunal noticed in case of other Co-operative Society that there seemed no intention to evade any tax, rather the deduction was claimed in a mistaken belief by the Co-operative Society. Thus, penalty could not be levied.

Relied:Asst. CIT v. Punjab State Federation of Cooperative House Building Society Ltd [ITA No. 1010/Chd/2012, dt. 18-12-2012].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

SUBSCRIBE FOR FULL CONTENT