The assessee claimed a deduction for the unpaid ad-hoc bonus . The Assessing Officer disallowed the deduction under Section 43B and imposed a penalty under Section 271(1)(c) for furnishing inaccurate particulars. The CIT(A) accepted the assessee’s explanation as plausible and deleted the penalty, finding no malafide intent. In the appeal, the ITAT reversed this, restoring the penalty, holding the claim baseless. On appeal the High Court held that the mere making of an incorrect or unsustainable claim in law does not, by itself, constitute furnishing inaccurate particulars of income or concealment under Section 271(1)(c) of the Income Tax Act. The Court observed that the assessee had disclosed all relevant facts and made no false statement regarding the bonus payment. The claim for deduction was based on a plausible interpretation of law, even though it was ultimately disallowed. As there was no evidence of concealment or malafide intent, the essential conditions for imposing a penalty under Section 271(1)(c) were not satisfied. Therefore, the Court ruled that the assessee cannot be penalised merely for raising a plausible claim that is later rejected. Relied on CIT v. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 /(2010) 11 SCC 762. , distinguished CIT v .Zoom Communication P. Ltd( 2010) 327 ITR 510/ 191 Taxman 179 ( Delhi)( HC ) . (ITA No. 512 OF 2003, dt. 20.06.2025) (AY . 1984-85)
Carona Limited v .DCIT (Bom )( HC) www.itatonline .org
S. 271(1)(c) : Penalty – Concealment – Disallowance of deduction- Method of accounting – Plausible interpretation of law – No malafide intention – Disclosed all relevant facts and no false statement –Penalty is deleted . [S. 43B , 145 , 260A ]
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