17 June 2024


Income Tax Appellate Tribunal

DCIT vs. Galaxy International Realtech Pvt. Ltd.



Direct Taxation

Mere disallowance of a claim will not amount to furnishing of inaccurate particulars of income

The Appellant company is engaged in the real estate development business. During the assessment proceedings under Section 143(3) of Income Tax Act, 1961(IT Act), the AO made disallowances. The assessee did not file appeal against disallowances. The AO had initiated penalty proceedings under Section 271(l)(c) of IT Act for filing Inaccurate particulars of income in respect of all the disallowances. However, the AO, during penalty proceeding, imposed penalty on disallowances.

Before the learned CIT (A), assessee submitted that books of accounts are subject to audit and the Appellant has followed Accounting Standard (AS)-2 issued by ICAI according which selling and distribution costs are not to be included as part of cost of inventories. It was also argued that addition made by AO is revenue neutral and doesn't involve any concealment. Treating certain items of expenses as capital, particularly when the same is reflected in audited financial statements and when the guidelines as contained in AS-2 is being followed, it was submitted, at maximum can be viewed as a debatable issue for which no penalty can be imposed. CIT (A) deleted the penalty holding that mere disallowance of a claim will not amount to furnishing of inaccurate particulars of income.

CIT (A) has taken correct view of the matter. His reliance on the Hon'ble Supreme Court decision in the case of Reliance Petroproducts Pvt. Ltd. is germane and duly supports the case of the assessee. The assessee's claim cannot be said to ex-facie bogus. Hence, denial of the assessee's claim cannot lead to the rigors of penalty under Section 271(1)(c) of the IT Act. Hence, there is no infirmity in the order of learned CIT (A). The appeal by the Revenue stands dismissed.

Tags : Penalty Deletion Legality

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