Opinion Of Eminent Legal Luminaries On Controversial Issues

Can Penalty Be Levied U/s. 271(1)(c) For Claim Made But Not Accepted By AO?

QUERY: An assessee makes a claim for deduction through a letter during the course of assessment proceedings. The claim is not allowed in assessment and also in appeals. The AO levied penalty under section 271(1)(c) of the Act. Whether penalty is leviable when claim has been specifically made during the course of assessment proceedings even if claim was not allowed at any stage?
ANSWER: The Orissa High Court in Orissa Rural Housing Development Corporation Ltd. v. ACIT [343 ITR 316] has held

“Law is well settled that when the statute requires a certain thing to be done in a certain way, the thing must be done in that way or not at all. Other methods or modes of performance are impliedly and necessarily forbidden. This settled legal proposition is based on the legal maxim expression uniusest exclusion alterius meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and no other manner.

There is a distinction between a revised return and a correction in the originally filed return. If an assessee files an application for correcting a return already filed or for making some amendments therein, it would not mean that he has filed a revised return. Such a petition is not recognised under the Income tax Act. The basis of assessment is the return filed by the assessee. If a revised return is filed under section 139(5) of the Act the assessment can be completed only on the basis of the revised return and not otherwise. There is no provision under the Act to enable an assessee to revise his income by way of filing a revised statement of income”.

Now, from the facts it is clear that the assessee made claim for deduction through a letter during the course of assessment proceedings, instead of revising the return. However, no claim of deduction was accepted by AO or CIT(A) which means, that the original return filed had been accepted.

So, there is no difference between assessed income and returned income. Hence, a question should not arise for initiating any penalty under section 271(1)(c) of the Act, as there is no concealment of particulars of income or furnishing inaccurate particulars of such income.
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