TMI Blog2014 (7) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... (10)(vi) of the Act - mere disallowance of any claim will not make the case fit for levy of penalty – Relying upon COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee - merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not attract the penalty u/s 271(1)(c) - as the matter has already been restored with respect to disallowance of rent made in quantum proceedings, the penalty imposed by AO has no legs to stand – Decided in favour of Assessee. - IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided in section 40(a)(ia) of the Act. By the impugned order CIT(A) confirmed the order of Assessing Officer for levy of penalty against which Assessee is in further appeal before us. 4. It was argued by the ld. Authorized Representative for the Assessee that penalty and quantum proceedings are separate and distinct proceedings. Therefore, mere disallowance in quantum proceedings cannot be made reason for levying penalty u/s. 271(1)(c). Our attention was drawn to the order of the Tribunal dated 20/04/2011 in ITA No.5945/M/2010 directing AO to restrict the disallowance in respect of royalty payment made after 13/07/2006. It was also submitted that payment so made was not royalty within the meaning of Explanation to Section 9(1)(vi) and (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance in respect of such payment made after 13/07/2006. Against the order of the Tribunal the Assessee filed Miscellaneous Application wherein the Tribunal held that the plea of the Assessee that provisions of section 194J was not applicable can not be challenged in Miscellaneous Application, in so far as same was not challenged at the time of hearing of main appeal. However the Tribunal held that same is a debatable issue. There is no dispute to the proposition that penalty and quantum proceedings are separate and distinct. The argument of the ld. Authorized Representative was that the provisions of section 194J were not applicable to an individual Assessee in respect of payment of royalty. Royalty has been defined in Explanation 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Full disclosure was made by the Assessee with respect to the expenditure claimed. Therefore, mere disallowance of legal claim can not be made the basis for levy of penalty u/s. 271(1)(c) of the Act. Thus there was no justification for levy of penalty for such disallowance. Accordingly Assessing Officer is directed to delete the same. 7.1 Similarly AO has also levied penalty by disallowing payment of rent of u/s. 40(a)(ia). However, vide order dated 20/04/2011 vide para 3.2 Tribunal has restored the matter to the file of the AO for passing a fresh order after allowing opportunity of hearing to assessee. 8. As the matter has already been restored with respect to disallowance of rent made in quantum proceedings, the penalty impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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