No section 271(1)(c) penalty on mere Disallowance of claim

Mere Disallowance of claim cannot be made the basis for levying Penalty under section 271(1)(c) of the Income Tax Act.

As per section 271(1)(c) of income tax act, 1961, assessing officer or CIT(A) or CIT in the course of proceedings under this Act may impose penalty in the range of 100% to 300% of the amount of tax sought to be evaded. The penalty can be impose if he satisfy that any person concealed the particulars of such income or furnished inaccurate particulars of such income. This penalty is in addition to the tax payable by assessee.

Further, there is also a concept of deemed concealment laid down under explanation 1 to section 271(1)(c). the explanation 1 is triggered when the person :-

  1. Fails to offer an explanation or
  2. Offers an explanation which is found to be false, or
  3. Offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him],

So the question is mere the claim made by a person in his return which disallowed by revenue, is comes under the ambit of section 271(1)(c) / explanation 1 of to section 271(1)(c). Continue reading