Facts of the case

Assessing Officer had levied the penalty under section 271(1)(c) of the Income-tax Act, 1961 on account of disallowance under section 43B.

Assessee had filed original return of income on 30.11.2014 for A.Y. 2014-15. The original return of income was revised by the assessee on 01.09.2016. The revision in return of income was triggered by a revision in tax audit report which was carried on 26.08.2016. Tax Audit Report was revised by Chartered Accountant of the assessee suo-motu. The original tax audit report reported disallowance under section 43B amounting to Rs. 6,08,64,813/-. In the revised tax audit report, the disallowance was suo motu enhanced to Rs.48,18,93,419/-. The query with regard to the issue concerning disallowance under section 43B was raised by the Assessing Officer for the first time via a notice dated 21.11.2016 issued under section 142(1).

Observations of the court

The enhancement of disallowance under section 43B was suo motu and not triggered by way of any specific notice issued by the Assessing Officer involving the aspects concerning Section 43B of the Act.

Decision

Since enhancement of disallowance under section 43B was done by way of revising initial tax audit report and by way of filing revised return of income much before issuance of specific notice by the Assessing Officer concerning aspects of disallowance under section 43B, it is held that enhancement of disallowance was made suo motu and accordingly assessee is not liable to penalty under section 271(1)(c).