Shri G.C. Gupta, Vice President (AZ)

1. This appeal by the Assessee for the Assessment Year 2005-06 is directed against the order of the ld.CIT(Appeals)-IV, Baroda dated 24/10/2011. The only issue in the ground of appeal of the assessee is regarding the validity of penalty imposed u/s. 271(1)(c) of the I.T.Act amounting to Rs.76,500/-. The ld.Counsel for the assessee submitted that, it is a case of difference of opinion between the Assessee and the Department regarding allowability of certain claim of deduction made by the assessee on which penalty u/s. 271(1)(c) of the I.T.Act could not be legally imposed. He submitted that the penalty u/s. 271(1)(c) of the I.T.Act has been imposed on disallowance on account of software and hardware expenses of Rs.82,250/-by holding them as not Revenue in nature and by disallowing interest pertaining to investment in shares amounting to Rs.1,20,685/-u/s. 14A of the I.T.Act and the disallowance of Rs.5,900/-only out of computer expenses. He submitted that the issue is covered in favour of the assessee with the decision of Honble Supreme Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. reported at (2010) 322 ITR 158 (SC) .

2. The ld.DR has opposed the submission of ld.Counsel for the assessee. He submitted that these disallowances were made as a result of deep scrutiny and by claiming expenditure as Revenue Expenditure, the assessee has reduced its tax liability. He submitted that the assessee has filed inaccurate particulars of income in respect of these disallowances and, therefore, the Assessing Officer has correctly levied penalty u/s. 271(1)(c) of the I.T.Act. He relied on the decision of Honble Delhi High Court in the case of CIT vs. Zoom Communication Pvt.Ltd. reported at (2010) 327 ITR 510(Del.) .

3. We have considered the rival submissions and have perused the orders of the Assessing Officer and Learned CIT(Appeals). We find that the penalty u/s. 271(1)(c) was levied on the ground of disallowance on account of software and hardware expenses held as Capital in nature by the Department and the interest pertaining to investment in shares disallowance u/s. 14A of the I.T.Act and the small disallowance of Rs.5,900/-sustained by the Learned CIT(Appeals) out of computer expenses claimed by the assessee. We find that the assessee has disclosed all material facts necessary for its assessment with regard to the claim of deduction of the above-mentioned amount before the Assessing Officer. It is a case of difference of opinion between the Assessee and the Department with regard to allowability or otherwise of certain deduction claimed by the assessee. It is not the law that in every case wherever a disallowance is made as a result of scrutiny or otherwise, the assessee will be liable to pay penalty u/s. 271(1)(c) of the I.T.Act. The issue is covered in favour of the assessee with the decision of Honble Apex Court in the case of CIT vs. Reliance Petroproducts (P) Ltd. reported at (2010) 322 ITR 158 (SC) and, accordingly, we hold that it is not a fit case for levy of penalty u/s. 271(1)(c) of the I.T.Act, which is accordingly cancelled and the ground of appeal of the assessee is allowed. In the result, Assessees appeal stands allowed.