B. Ramakotaiah, A.M:— This appeal by the Revenue is against the order of the CIT(A) VI, Mumbai dated 15.01.2010 cancelling the penalty of Rs. 2,38,796/- imposed under section 271(1)(c).
2. Briefly stated, the A.O had levied penalty in respect disallowances under section 35DDA and 14A of the I.T Act. The facts relating to the disallowance under section 35DDA was that assessee claimed 1/5th of the total expenditure incurred on VRPS introduced in A.Y 2001-2002. However, in that year the deduction was restricted to the actual amount paid under the voluntary retirement scheme. Consequently the deduction in this year was correspondingly reduced. With reference to section 14A the A.O disallowed expenditure on the dividend received in respect of mutual funds and UTI bonds, which matter was contested in appeal. The CIT(A) considered that these two issues are genuine claims/bonafide claims and penalty under section 271(1)(c) cannot be levied on issues which are highly contentious and different views are possible. Accordingly the penalty levied was deleted.
3. The learned D.R relied on the order of the A.O whereas the learned counsel submitted that the claims are bonafide and submitted that based on the principles established by the Hon'ble Supreme Court in the case of Reliance Petroproducts 322 ITR 158, penalty is not leviable on bonafide claims made which are not allowed in the assessment.
4. We have considered the issue. As far as disallowance under section 14A is concerned, it was informed that the said disallowance was restored to the file of the A.O by the ITAT in the quantum appeal, therefore the question of levy of penalty on that issue at the moment does not arise. The A.O is free to initiate penalty proceedings, if required, keeping in mind the principles on the issue. With reference to the claim of disallowance under section 35DDA, the disallowance arose consequent to the decision in A.Y 2001-2002. The claim is a bonafide claim. Because of interpretation of the provision the claim was restricted in that year and consequently in this year. The same cannot be considered for penalty under section 271(1)(c). Not only that penalty levied in A.Y 2001-2002 was also deleted by the CIT(A). Therefore, we agree with the findings of the CIT(A). The facts of the case does not warrant levy of penalty under section 271(1)(c) as the issues are contentious and different views are possible.
5. Apart from that the appeal also to be dismissed on tax effect as the tax/penalty involved is only Rs. 2,38,796/- only. Following the principles established by the Hon'ble Bombay High Court in the case of Commissioner Of Income-Tax v. Madhukar K. Inamdar (Huf)) 318 ITR 149, the appeal is not maintainable on tax basis as the CBDT circular issued is equally applicable to all cases pending in appellate forums. On the tax effect issue also the appeal is not maintainable.
6. In the result, appeal of the Revenue is dismissed.
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