IN INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER . ITA No. 3102 Ahd 2013 Assessment Year : 2005-06 Abdul Jalalbhai Vadaviya, ITO, Shop No.10, 1st Floor, Vs Ward 9 (4), Super Complex, Sarkhej Dhal, Ahmedabad Sarkhej Highway, Ahmedabad PAN : AAYPV 5757 B (Appellant) (Respondent) Assessee by : Shri Tej Shah, Advocate Revenue by : Shri Rahul Kumar, Sr DR Date of Hearing : 26 09 2016 Date of Pronouncement: 26 09 2016 ORDER This appeal by assessee is directed against order of Commissioner of Income-Tax (Appeals)-I, Ahmedabad dated 14.10.2013 for AY 2005-06. 2. sole ground raised by assessee reads as under:- That ld. CIT(A) erred in confirming order of AO in levying penalty u s 271(1)(c) of Act. 3. Ld. Counsel for assessee contends as under:- (i) AY 2005-06 was first year of introduction of Section 40(a)(ia) and there existed difference of opinion about interpretation of Section 40(a)(ia) of Act; (ii) assessee was bona fide belief that these provisions were not applicable to impugned contractors payments; (iii) assessee s books of accounts were audited and even auditors did not point out that impugned payments were in SMC-ITA No. 3102 Ahd 2013 Abdul Jalalbhai Vadaviya vs. ITO AY : 2005-06 2 any way hit by Section 40(a)(ia); thus, assessee s bona fide belief demonstrated from facts and circumstances; (iv) Reliance is placed on ITAT, Hyderabad Bench decision in case of ACIT vs. Medversity Online Limited, reported in [2012] 27 taxmann.com 109 (Hyd), wherein similar penalty was deleted by Tribunal, by following observations:- 5. We have considered rival submissions and perused orders of assessing officer and CIT(A). We find that disallowance of expenses was made by invoking provisions of S.40(a)(ia) of Act. In this case, assessee has furnished all relevant material facts alongwith its return of income. audit report in statutory form was also annexed to return of income by assessee. assessee has filed explanation which could not be said to be not bona fide. We find that merely because certain disallowance has been made due to some provision of law, it could not be said that assessee is guilty of concealment of income or furnishing of inaccurate particulars of income. It is not case of Department that explanation of assessee was without any basis or foundation. It is case of honest difference of opinion between assessee and revenue regarding disallowance made and applicability of provisions of S.40(a)(ia) of Act. In these facts of case, we hold that no case for imposition of penalty under S.271(1)(c) of Act could be made out by Department. Accordingly, there is no mistake in order of CIT(A) in holding that there was no case or justification for imposing penalty under S.271(1)(c) of Act. Accordingly, grounds of appeal of Revenue are rejected. (v) It is contended that assessee being under bona fide belief that penalty is not exigible. 4. Ld. DR, on other hand, supported orders of authorities below. 5. I have heard rival contentions, perused material available on record and gone through orders of lower authorities. From facts and circumstances, it is discernable that assessee was under bona fide SMC-ITA No. 3102 Ahd 2013 Abdul Jalalbhai Vadaviya vs. ITO AY : 2005-06 3 belief about applicability of provisions of Section 40(a)(ia). auditors also have not pointed out any default in terms of Section 40(a)(ia). Therefore, following decision of ITAT, Hyderabad Bench in case of ACIT vs. Medversity Online Limited (supra), this is not fit case for imposition of penalty which is deleted. Accordingly, assessee s appeal is allowed. 6. In result, appeal filed by assessee is allowed. Order pronounced in Court on 26th September, 2016 at Ahmedabad. Sd - R.P. TOLANI (JUDICIAL MEMBER) Ahmedabad; Dated 26 09 2016 *Biju T. Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. Concerned CIT 4. ( ) CIT(A) 5. , , DR, ITAT, Ahmedabad 6. Guard file. BY ORDER, TRUE COPY (Dy. Asstt.Registrar) , ITAT, Ahmedabad Abdul Jalalbhai Vadaviya v. ITO, Ward 9 (4), Ahmedabad