disallowance u/s 40(a)(ia) penalty for concealment

[jindalrk]

there was addition u/s 40(a)(ia) now AO desires to impose concealment penalty. pl. guide on this point. as i have to reply to ao.

CA RKJINDAL

[jindalrk]

there was addition u/s 40(a)(ia) now AO desires to impose concealment penalty. pl. guide on this point. as i have to reply to ao.

CA RKJINDAL

[pawansingla]

first of all check whether issue is covered by special bench , or calcutta high court judgement on clarrifactory nature of amendment by finance Act, 2010.

[ashutosh majumdar]

there was addition u/s 40(a)(ia) now AO desires to impose concealment penalty. pl. guide on this point. as i have to reply to ao.

CA RKJINDAL

What are the facts? What is the disallowance on? Was there a disclosure in the ROI? As pawansinglaji points out, there have been a spate of judgements on s. 40(a)(i) in favour of the assessee. If you give your facts, it can be checked.

[saumil]

ACIT vs. Seaways Shipping Ltd. in appeal no.80/H/2011Hyderabad bench of ITAT

"In this case, penalty is levied for disallowance of expenditure under section 40(a) (ia) of the Income Tax Act. Non deduction of TDS by the assessee was resulted in disallowance of expenditure under section 40(a) (ia), that itself cannot be construed as furnishing inaccurate particulars of income or concealment of income. The assessee has failed to deduct TDS which resulted in disallowance of expenditure. In our opinion, the mistake committed by the assessee was compensated by disallowing the expenditure. Further, the revenue cannot penalize the assessee by levying penalty under section 271(1) (c ) of the Act. In order to levy penalty under section 271 (1) (c) of the Act, there has to be concealment of particulars of income of the assessee or the assessee must have furnished inaccurate particulars of its income. Present is not the case of concealment of income or it is not the case of revenue that the assessee has furnished inaccurate particulars of income. The department has not found out that the assessee has furnished any factual incorrect information and the assessee is not guilty of furnishing of inaccurate particulars of income. In our opinion, the conditions laid down in section 271(1) (c) of the Act is not complied with. Being so, levy of penalty is not justified merely because the assessee has claimed certain expenditure that expenditure is not eligible in view of the provisions of section 40(a)(ia) of the Act and for that reason, expenditure is disallowed. Penalty cannot be levied for mere making of a claim of the expenditure which is not sustainable and deletion of penalty by the CIT(A) is justified. We place reliance on the judgement of the Honble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC). Accordingly the ground raised by the revenue holds no merit."

[rajul5234]

Penalty u/s 271(I)(c) is not justifiable for the simple reason that various courts have admitted writs challenging vires of the amendment Gujarat high court has not only admitted writs  but also stayed the operation, impplementation and execution of assessment orders corelateable to dissallowance u/s 40 a ( ia). Matters from across the country on this issue are transferred to supreme court on  transfer petitions preferred by inion of india at delhi.

R. K. Patel

[probal_shome]

Gujarat high court has not only admitted writs  but also stayed the operation, impplementation and execution of assessment orders corelateable to dissallowance u/s 40 a ( ia).

Matters from across the country on this issue are transferred to supreme court on  transfer petitions preferred by inion of india at delhi.

Where is this Sir? I am not aware of this. Can you please post some details.

[rajul5234]

I have filed 39 writs on this subject matter, all having operating interim orders of  Rule  with Interim Relief.  Now  matters are transferred to Supreme Court at instance of Union's Petitions for Transfer at supreme Court. final Disposal is awaited.

R. K. Patel

[mohiticai]

AT & T Communication Service India (P) Ltd u/s (2010) 42DTR (Del) (Trib) 22. It was held that merely because certain claim has been disallowed by invoking the deeming provisions contained in 40(a)(ia), it cannot be said that the assessee's claim of deduction was false.

Supreme Court in the case of CIT Vs Reliance Pertoproducts (P) Ltd (2010) 230 CTR (SC) 320, in which it is held that in order to attract the provisions of sec 271(1)(c), there has to be concealment of income or furnishing of inaccurate particulars of his income by the assessee. Merely an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. Merely because the assessee claimed deduction which has not been accepted by the revenue, penalty u/s 271(1)(c) is not attracted.