No Penalty for Debatable Tax Claims Made in Good Faith: ITAT Chennai
The ITAT Chennai quashed the 200% penalty of Rs. 5,48,464 imposed under Section 270A(9), ruling in favor of the assessee, Chitra Jaikumar. The Tribunal held that penalty under Section 270A is discretionary, not mandatory, as the provision uses “may” instead of “shall”. The assessee fully disclosed all facts in her ITR and claimed full exemption on leave encashment under Section 10(10AA) based on a bona fide belief, considering her prior service in the Telecom Department before BSNL’s corporatization. Since the taxability of BSNL employees’ leave encashment was legally debatable, the Tribunal ruled that penalty cannot be imposed on a disputed claim. Citing the Pune ITAT ruling in a similar case, it further held that Section 270A(6) protects claims made in good faith. Accordingly, the penalty order was set aside, and the appeal was allowed.
The copy of the order is as under:
